Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
by and among
EMULEX CORPORATION,
SHASTA ACQUISITION CORP.,
SIERRA LOGIC, INC.,
Steven F. Foster,
as Stockholder Representative
(with respect to certain provisions only), and
the Principal Stockholders named on Schedule A hereto
(with respect to certain provisions only)
dated as of
August 29, 2006
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER .........................................................2
Section 1.1 The Merger..........................................2
Section 1.2 The Closing.........................................2
Section 1.3 Effective Time......................................2
Section 1.4 Effects of the Merger...............................2
Section 1.5 Charter and Bylaws..................................2
Section 1.6 Directors...........................................3
Section 1.7 Officers............................................3
ARTICLE II CONVERSION OF SHARES................................................3
Section 2.1 Conversion of Shares................................3
Section 2.2 Options.............................................5
Section 2.3 Warrants............................................5
Section 2.4 Escrow..............................................6
Section 2.5 Payment and Surrender of Certificates...............6
Section 2.6 Termination of Payment Fund.........................7
Section 2.7 No Liability........................................7
Section 2.8 Dissenting Shares; Appraisal Rights.................7
Section 2.9 No Further Ownership Rights in Capital Stock........8
Section 2.10 Lost, Stolen or Destroyed Certificates..............8
Section 2.11 Tax Withholding.....................................8
Section 2.12 Transfer Taxes......................................8
Section 2.13 Further Assurances..................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY..........................9
Section 3.1 Organization........................................9
Section 3.2 Capitalization.....................................10
Section 3.3 Authority Relative to this Agreement...............12
Section 3.4 Consents and Approvals; No Violations..............12
Section 3.5 Financial Statements...............................13
Section 3.6 Absence of Certain Changes.........................13
Section 3.7 No Undisclosed Liabilities.........................16
Section 3.8 Information in Disclosure Documents................16
Section 3.9 No Default.........................................16
Section 3.10 Litigation.........................................16
Section 3.11 Compliance with Laws...............................17
Section 3.12 Taxes..............................................17
Section 3.13 Employee Benefits..................................18
Section 3.14 Change in Control..................................20
Section 3.15 Intellectual Property..............................20
Section 3.16 Contracts and Commitments..........................25
Section 3.17 Employment and Labor Matters.......................26
Section 3.18 Environmental Matters..............................27
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Section 3.19 Insurance..........................................28
Section 3.20 Title to Properties; Encumbrances..................29
Section 3.21 Leases.............................................29
Section 3.22 Related Party Transactions.........................29
Section 3.23 Absence of Certain Payments........................30
Section 3.24 Brokers or Finders; Merger Expenses................30
Section 3.25 Opinion of Financial Advisor.......................30
Section 3.26 Books and Records..................................30
Section 3.27 Full Disclosure....................................30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............31
Section 4.1 Organization.......................................31
Section 4.2 Authority Relative to this Agreement...............31
Section 4.3 Activities of Merger Sub...........................31
Section 4.4 Consideration......................................31
ARTICLE V COVENANTS OF THE COMPANY AND THE STOCKHOLDERS.......................31
Section 5.1 Conduct of Business Pending Merger.................31
Section 5.2 No Solicitation of Competing Transaction...........34
Section 5.3 Further Information................................34
Section 5.4 Access; Confidentiality............................35
Section 5.5 280G Consent.......................................35
Section 5.6 Stockholder Approval; Consents.....................35
Section 5.7 Necessary Consents; Notices........................36
ARTICLE VI OTHER COVENANTS....................................................36
Section 6.1 All Reasonable Efforts.............................36
Section 6.2 Publicity..........................................37
Section 6.3 Notification of Certain Matters....................37
Section 6.4 Employees; Employee Benefits.......................38
Section 6.5 Tax Matters........................................38
Section 6.6 Directors' and Officers' Indemnification...........39
Section 6.7 Insurance..........................................40
ARTICLE VII CONDITIONS........................................................40
Section 7.1 Conditions of Obligations of the Company...........40
Section 7.2 Conditions of Obligations of Parent................41
ARTICLE VIII TERMINATION AND AMENDMENT........................................43
Section 8.1 Termination........................................43
Section 8.2 Effect of Termination..............................44
ARTICLE IX INDEMNIFICATION AND ESCROW.........................................44
Section 9.1 Indemnification by the Stockholders................44
Section 9.2 Procedure for Third Party Claims...................45
Section 9.3 Indemnity Period...................................45
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Section 9.4 Indemnification Basket.............................45
Section 9.5 Limitation on Indemnity............................45
Section 9.6 The Stockholder Representative.....................46
Section 9.7 Actions of the Stockholder Representative..........47
Section 9.8 No Right of Contribution...........................47
Section 9.9 FIRPTA Certificate.................................47
ARTICLE X DEFINITIONS AND INTERPRETATION......................................48
Section 10.1 Definitions........................................48
Section 10.2 Interpretation.....................................54
ARTICLE XI MISCELLANEOUS......................................................55
Section 11.1 Survival...........................................55
Section 11.2 Fees and Expenses..................................55
Section 11.3 Amendment..........................................56
Section 11.4 Extension; Waiver..................................56
Section 11.5 Notices............................................56
Section 11.6 Descriptive Headings...............................57
Section 11.7 Counterparts.......................................57
Section 11.8 Entire Agreement; Assignment.......................58
Section 11.9 Governing Law......................................58
Section 11.10 Specific Performance...............................58
Section 11.11 Parties in Interest................................58
EXHIBITS
- -------
A Form of Escrow Agreement............................................A-1
B-1 Named Employees...................................................B-1-1
B-2 Form of Employment Agreement .....................................B-2-1
B-3 Form of Restrictive Covenants Agreement ..........................B-3-1
C Certificate of Incorporation of the Surviving Corporation...........C-1
D Bylaws of Surviving Corporation.....................................D-1
E Designated Individuals..............................................E-1
F Form of FIRPTA Certificate..........................................F-1
G Form of Legal Opinion of the Company's Counsel......................G-1
H Amended and Restated Certificate of Incorporation ..................H-1
SCHEDULES
- ---------
A Principal Stockholders
B Additional Indemnities
C Calculation of Merger Consideration
Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of August 29, 2006, is by and among EMULEX CORPORATION, a Delaware
corporation ("Parent"), SHASTA ACQUISITION CORP., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), SIERRA LOGIC, INC., a
Delaware corporation (the "Company"), Steven F. Foster as Stockholder
Representative, and the principal stockholders of the Company set forth on
Schedule A hereto (the "Principal Stockholders"). The Stockholder
Representative is a party solely for purposes of Section 6.5 and the applicable
sections of Articles IX, X and XI of this Agreement. The Principal Stockholders
are parties solely for purposes of Sections 5.2 and 6.2 and the applicable
sections of Articles IX, X and XI of this Agreement. Certain capitalized terms
used in this Agreement have the meanings ascribed to them in Article X, Section
10.1 hereof.
W I T N E S S E T H:
--------------------
WHEREAS, the Board of Directors of Parent has approved, and
deems it advisable and in the best interests of its stockholders to consummate,
the merger (the "Merger") of Merger Sub with and into the Company, upon the
terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company (the "Board"),
having carefully considered the long-term prospects and interests of the
Company and the Stockholders, has approved the transactions contemplated hereby
and has recommended to the Stockholders the approval and adoption of this
Agreement and the consummation of the transactions contemplated hereby, upon
the terms and subject to the conditions set forth herein, each in accordance
with the applicable provisions of the Delaware General Corporation Law ("DGCL")
and the California Corporations Code (the "Corporations Code");
WHEREAS, the Boards of Directors of each of Parent and Merger
Sub, and the sole stockholder of Merger Sub have approved this Agreement and
the transactions contemplated hereby in accordance with the applicable
provisions of the DGCL and the Corporations Code;
WHEREAS, the holders of shares of Common Stock and Preferred
Stock (the "Stockholders"), constituting at least the Required Vote, having
considered the recommendation of the Board to approve and adopt this Agreement
and consummate the transactions contemplated hereby, have delivered to the
Secretary of the Company, and the Secretary of the Company has delivered to
Parent, Consents (which Consents shall become effective immediately upon the
execution of this Agreement) with respect to all such shares irrevocably
adopting and approving this Agreement, the Merger and the transactions
contemplated hereby, all in accordance with the applicable provisions of the
DGCL, the Corporations Code, the Charter and Bylaws;
WHEREAS, Parent, the Company and the Stockholder
Representative are entering into an Escrow Agreement in the form of Exhibit A
attached hereto (the "Escrow Agreement"), pursuant to which a certain portion
of the Merger Consideration is to be placed in an Escrow Fund to secure the
indemnification obligations of the Company to Parent; and
WHEREAS, each of the employees of the Company listed on
Exhibit B-1 (the "Named Employees") is executing and delivering to Parent (i)
an executed employment offer letter (including the related Employee Creation
and Non-Disclosure Agreement) in substantially the form attached hereto as
Exhibit B-2 (each an "Employment Agreement"), and (ii) an executed restrictive
covenants agreement in substantially the form attached hereto as Exhibit B-3
(each, a "Restrictive Covenants Agreement"), which agreements shall become
effective only upon the Effective Time.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the applicable
provisions of the DGCL, Merger Sub shall be merged with and into the Company at
the Effective Time. Following the Merger, the separate corporate existence of
Merger Sub shall cease, and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights, properties, liabilities and obligations of Merger Sub in accordance
with the DGCL.
Section 1.2 The Closing. Closing of the Merger (the
"Closing") shall take place at 10:00 a.m., Pacific time, on a date to be
specified by the parties, which shall be no later than the fifth (5th) business
day after satisfaction or waiver of all of the conditions set forth in Article
VII of this Agreement (the "Closing Date"), at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, located at 525 University Avenue, Suite 1100, Palo
Alto, California, unless another time, date or place is agreed to in writing by
the parties hereto or required under the DGCL.
Section 1.3 Effective Time. Upon the terms and subject to the
conditions set forth in Article VII of this Agreement, the parties hereto shall
file a Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the applicable provisions of the DGCL (the
"Certificate of Merger"). The parties hereto shall make all other filings,
recordings or publications required by the DGCL in connection with the Merger.
The Merger shall become effective at the time specified in the Certificate of
Merger, which specified time shall be a time on the Closing Date (the time at
which the Merger becomes effective being the "Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the
effects set forth in section 259 of the DGCL.
Section 1.5 Charter and Bylaws.
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(a) Immediately after the Effective Time, the
certificate of incorporation of the Surviving Corporation shall be as set forth
in Exhibit C to this Agreement, and such certificate of incorporation shall be
the certificate of incorporation of the Surviving Corporation until thereafter
amended as provided by law and such certificate of incorporation of the
Surviving Corporation.
(b) Immediately after the Effective Time, the bylaws
of Surviving Corporation shall be as set forth in Exhibit D to this Agreement,
and such bylaws shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by law and such bylaws of the Surviving
Corporation.
Section 1.6 Directors. The directors of Merger Sub at the
Effective Time shall be the only directors of the Surviving Corporation until
the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be. In furtherance
thereof, the Company shall secure, effective at the Effective Time of the
Merger, such resignations, as directors, of its incumbent directors, and the
Company shall take all other actions available to the Company to cause
designees of Parent to be elected or appointed as directors of the Surviving
Corporation at the Effective Time.
Section 1.7 Officers. The officers of Merger Sub at the
Effective Time shall be the only officers of the Surviving Corporation until
the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Shares.
(a) Treatment of Common Stock. Subject to the
limitations in this Agreement, each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Common Stock to be cancelled pursuant to Section 2.1(c) and Dissenting Shares
(as defined below)) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be cancelled and extinguished and automatically
converted into the right to receive an amount of cash equal to the Common Stock
Merger Consideration, as adjusted pursuant to Section 2.1(e), without interest,
and subject to any escrow, set off, deduction or indemnification contemplated
herein. At the Effective Time, all such shares of Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of Common Stock (the
"Common Stock Certificates") shall cease to have any rights with respect
thereto, except the right to receive the Common Stock Merger Consideration.
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(b) Treatment of Preferred Stock. Subject to the
limitations in this Agreement, (i) (x) each share of Series A Preferred Stock,
issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares, if any), shall, by virtue of the Merger and without any
action on the part of the holder thereof be cancelled and extinguished and
automatically converted into the right to receive the Series A Merger
Consideration, with the amount exceeding $0.4658 being adjusted pursuant to
Section 2.1(e), without interest, and (y) with the full amount being subject to
any escrow, set off, deduction or indemnification contemplated herein; (ii) (x)
each share of Series B Preferred Stock, issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares, if any), shall, by
virtue of the Merger and without any action on the part of the holder thereof
be cancelled and extinguished and automatically converted into the right to
receive the Series B Merger Consideration, with the amount exceeding $0.5774168
being adjusted pursuant to Section 2.1(e), without interest, and (y) with the
full amount being subject to any escrow, set off, deduction or indemnification
contemplated herein; (iii) (x) each share of Series C Preferred Stock, issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares, if any), shall, by virtue of the Merger and without any action on the
part of the holder thereof be cancelled and extinguished and automatically
converted into the right to receive the Series C Merger Consideration, with the
amount exceeding $0.64 being adjusted pursuant to Section 2.1(e), without
interest, and (y) with the full amount being subject to any escrow, set off,
deduction or indemnification contemplated herein (together with the Common
Stock Merger Consideration, the Series A Merger Consideration and Series B
Merger Consideration, the "Merger Consideration"). At the Effective Time, all
shares of Preferred Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Preferred Stock (together with
the Common Stock Certificates, the "Certificates") shall cease to have any
rights with respect thereto, except the right to receive the applicable Merger
Consideration.
(c) Cancellation of Capital Stock Owned by Company.
Each share of Capital Stock that is owned by the Company or any direct or
indirect wholly owned subsidiary of the Company immediately prior to the
Effective Time shall be automatically cancelled and extinguished, and no
consideration shall be delivered in exchange therefor.
(d) Capital Stock of Merger Sub. Each share of
common stock, $0.01 par value, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one (1)
validly issued, fully paid and non-assessable share of common stock of the
Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall evidence ownership of such shares of Common
Stock of the Surviving Corporation.
(e) Adjustments. The per share Merger Consideration
(i) shall be adjusted to reflect the full effect of any stock split, reverse
split, stock dividend (including any dividend or distribution or distribution
of securities convertible into Capital Stock), reorganization, recapitalization
or other like change with respect to Capital Stock that occurs or
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has a record date after the date hereof and prior to the Effective Time, and
(ii) shall be reduced to give effect to any inaccuracy of the representations
and warranties of the Company set forth in Sections 3.2 hereof.
Section 2.2 Options.
(a) At the Effective Time, each outstanding stock
option, stock equivalent right or right to acquire shares of Common Stock, to
the extent unexercised (each, an "Option"), issued under the Stock Plan,
whether or not then vested, shall be assumed by Parent in accordance with the
Stock Plan, and immediately converted into an option to purchase that number of
shares of Parent Common Stock equal to (i) the number of shares of Common Stock
subject to the Option immediately prior to the Effective Time, multiplied by
(ii) the Option Exchange Ratio, rounded down to the nearest whole share, at a
price per share of Parent Common Stock equal to (x) the per share exercise
price of the Option immediately prior to the Effective Time, divided by (y) the
Option Exchange Ratio, rounded up to the nearest tenth of a cent. Each Option
so assumed and converted shall continue to have and be subject to terms and
conditions (including vesting schedule and repurchase rights) as are currently
applicable to each such Option. As soon as reasonably practicable following the
Effective Time, Parent shall deliver to each holder of an Option an appropriate
notice setting forth the terms of such assumption and conversion. With respect
to any Option that is an incentive stock option (within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code")) immediately
prior to the Effective Time, but in no event later than fifteen (15) business
days after the Effective Time, such assumption shall, to the extent reasonably
practicable, conform to the requirements of Section 424(a) of the Code. "Option
Exchange Ratio" means the quotient determined by dividing the Common Stock
Merger Consideration payable for one (1) share of Common Stock by the average
of the closing sale prices for one (1) share of Parent Common Stock as quoted
on the New York Stock Exchange for the ten (10) consecutive trading days ending
on (and including) the trading day immediately preceding the Closing Date.
(b) Except as may be otherwise agreed to by Parent
and the Company or as otherwise contemplated or required to effectuate this
Section 2.2, (i) no action shall be taken by the Company prior to the Merger
(except as expressly provided in this Agreement) to accelerate any Option, (ii)
the provisions in any Benefit Plan other than the Stock Plan providing for the
issuance or grant of any other interest in respect of the Capital Stock of the
Company shall be deleted or otherwise terminated as of the Effective Time and
(iii) no Person shall have any right under any Benefit Plan other than the
Stock Plan with respect to equity securities of the Company, Parent or the
Surviving Corporation or any subsidiary thereof.
(c) At or before the Effective Time, the Company
shall provide to Parent such documents, records and other information as is
necessary or appropriate, and cause to be effected any necessary amendments to
the Stock Plan, to give effect to the foregoing provisions of this Section 2.2.
Section 2.3 Warrants. As of the Effective Time, all warrants
convertible into, or exchangeable for, Securities (the "Warrants") shall have
been exercised or otherwise have
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expired or terminated in accordance with the terms of the applicable governing
instrument. Following the Effective Time, no Warrants shall remain outstanding
and no holder of a Warrant shall have the right to receive any security or
other consideration of the Company, Parent or the Surviving Corporation upon
the exercise or conversion of such Warrant.
Section 2.4 Escrow. At the Effective Time, Parent shall
withhold the Escrow Amount, subject to the terms of the Escrow Agreement.
Concurrent with the Closing, Parent, the Stockholder Representative and the
Escrow Agent shall enter into the Escrow Agreement. Within fifteen (15)
business days after the Closing Date, Parent shall cause the Escrow Amount to
be deposited with the Escrow Agent.
Section 2.5 Payment and Surrender of Certificates.
(a) Prior to the Effective Time, Parent or Merger
Sub shall designate a bank or trust company reasonably acceptable to the
Company to act as Payment Agent in connection with the Merger (the "Payment
Agent"). Subject to the terms of any restricted stock agreement applicable to
any Capital Stock (each a "Restricted Stock Agreement"), and Sections 2.4 and
2.8 hereof, at or prior to the Effective Time, Parent will provide to, or cause
the Surviving Corporation to provide to, and shall deposit in trust with, the
Payment Agent, the aggregate Merger Consideration less the Escrow Amount. Until
used for that purpose, the funds shall be invested by the Payment Agent, as
directed by Parent or the Surviving Corporation, in obligations of or
guaranteed by the United States of America or obligations of an agency of the
United States of America which are backed by the full faith and credit of the
United States of America, in commercial paper obligations rated A-1 or P-1 or
better by Moody's Investors Service, Inc. or Standard & Poor's Corporation, or
in deposit accounts, certificates of deposit or banker's acceptances of,
repurchase or reverse repurchase agreements with, or Eurodollar time deposits
purchased from, commercial banks, each of which has capital, surplus and
undivided profits aggregating more than $500 million (based on the most recent
financial statements of the banks which are then publicly available at the
Securities Exchange Commission or otherwise). All fees and expenses of the
Payment Agent shall be paid by Parent.
Promptly after the Effective Time, Parent shall instruct the
Payment Agent to mail to each holder of record of Capital Stock a letter of
transmittal and instructions for use in effecting the surrender of the
Certificates in exchange for such holder's portion of the Merger Consideration.
Subject to the terms of any Restricted Stock Agreement and Sections 2.4, 2.6,
2.8 and 2.10 hereof, promptly upon surrender of a Certificate to the Payment
Agent, together with such letter of transmittal, duly executed, and such other
information as the Payment Agent may reasonably request, the holder of such
Certificate shall be entitled to receive in exchange therefor that portion of
the Merger Consideration, without interest, represented by such Certificate,
less any required Tax withholdings in accordance with Section 2.11 hereof, and
the Certificate shall forthwith be cancelled; provided that, Parent may satisfy
such obligation to any such holder, in part, by depositing a portion of the
Merger Consideration to which such holder would otherwise be entitled, into
escrow pursuant to the terms of Section 2.4 and the Escrow Agreement. Until
surrendered as contemplated by this Article II, from and after the Effective
Time each Certificate shall be deemed to represent only the right to receive
its portion of the Merger Consideration determined pursuant to this Agreement
then due and shall not evidence any interest in, or any
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right to exercise the rights of a stockholder of Parent or the Surviving
Corporation. If the Merger Consideration is to be paid to a person other than
the one in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition to such payment that such Certificate be
properly endorsed (or accompanied by an appropriate instrument of transfer) and
accompanied by evidence that any applicable stock transfer taxes and other
applicable taxes have been paid or provided for.
Section 2.6 Termination of Payment Fund. At any time which is
more than six (6) months after the Effective Time, Parent shall be entitled to
require the Payment Agent to deliver to it any funds which had been deposited
with the Payment Agent and have not been disbursed in accordance with this
Article II (including, without limitation, interest and other income received
by the Payment Agent in respect of the funds made available to it), and after
the funds have been delivered to Parent, Stockholders entitled to payment in
accordance with this Article II shall be entitled to look solely to Parent
(subject to abandoned property, escheat or other similar applicable laws) for
payment of the Merger Consideration upon surrender of the Certificates held by
them, without any interest thereon. Any Merger Consideration remaining
unclaimed as of a date which is immediately prior to such time as such amounts
would otherwise escheat to or become property of any government entity shall,
to the extent permitted by applicable law, become the property of Parent free
and clear of any claims or interest of any person previously entitled thereto.
Section 2.7 No Liability. Notwithstanding anything to the
contrary in this Article II, none of the Payment Agent, the Surviving
Corporation or any party hereto shall be liable to any person in respect of any
cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
Section 2.8 Dissenting Shares; Appraisal Rights. If
Stockholders are entitled to appraisal rights in connection with the Merger
pursuant to Section 262 of the DGCL, or if Section 2115 of the Corporations
Code applies to the Company and the Stockholders are entitled to appraisal
rights in connection with the Merger pursuant to Chapter 13 of the Corporations
Code, any Dissenting Shares will not be converted into the right to receive a
Merger Consideration as provided in Section 2.1 hereof, but will be entitled to
such rights (but only such rights) as may be determined to be due with respect
to such Dissenting Shares pursuant to Section 262 of the DGCL or, if
applicable, Chapter 13 of the Corporations Code. The Company will give Parent
prompt notice (and in any case, within one (1) business day) of any demand
received by the Company for appraisal of shares of Capital Stock, and Parent
will have the right to control all negotiations and proceedings with respect to
such demand. Company agrees that, except with Parent's prior written consent,
it will not voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for appraisal. If any Stockholder fails to make an
effective demand for payment or otherwise loses his status as a holder of
Dissenting Shares, then the appraisal right of such holder shall cease and such
Dissenting Shares shall be deemed to have been converted at the Effective Time
into, and shall have become, the right to receive such Merger Consideration to
which such Stockholder would have been entitled pursuant to Section 2.1,
subject to the provisions of this Agreement. "Dissenting Shares" means any
shares of Common Stock or Preferred Stock that are outstanding immediately
prior to the Effective Time with respect to which dissenters' rights to obtain
payment for such Dissenting Shares in
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accordance with the DGCL, or if applicable, Chapter 13 of the Corporations
Code, have been duly and properly exercised and perfected in connection with
the Merger.
Section 2.9 No Further Ownership Rights in Capital Stock.
From and after the Effective Time, no shares of Capital Stock will be deemed to
be outstanding, and holders of Certificates formerly representing such Capital
Stock shall cease to have any rights with respect thereto except as provided
herein or by applicable law. At the Effective Time, the stock transfer books of
Company shall be closed and no further registration or transfer of Capital
Stock shall thereafter be made, excepting for stock issued by the Surviving
Corporation after the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Payment Agent
for any reason, they shall be canceled and exchanged as provided in this
Article II, subject to Section 2.4 and the Escrow Agreement.
Section 2.10 Lost, Stolen or Destroyed Certificates. In the
event any Certificates shall have been lost, stolen or destroyed, the Payment
Agent shall issue in exchange for such lost, stolen or destroyed Certificates,
upon the making of an affidavit of that fact coupled with an indemnity by the
holder thereof, such Merger Consideration as may be required pursuant to
Sections 2.1 and 2.4 hereof; provided, however, that Parent or the Surviving
Corporation may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent, the Surviving Corporation or the Payment
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
Section 2.11 Tax Withholding. Parent or Parent's agent shall
be entitled to deduct and withhold from the Merger Consideration, or other
payment otherwise payable pursuant to this Agreement or the Escrow Agreement,
the amounts required to be deducted and withheld under the Code, or any
provision of any Federal, state, local or foreign tax law. To the extent that
amounts are so deducted and withheld, such deducted and withheld amounts shall
be treated for all purposes of this Agreement as having been paid to such
holder in respect of whom such deduction and withholding was made.
Section 2.12 Transfer Taxes. In no event shall Parent or the
Surviving Corporation bear any Tax imposed in connection with any holder's
receipt of the Merger Consideration, or other payment otherwise payable
pursuant to this Agreement or the Escrow Agreement, to which such holder is
entitled.
Section 2.13 Further Assurances. If at any time after the
Effective Time the Surviving Corporation shall determine, in its sole
discretion, or shall be advised, that any deeds, bills of sale, assignments,
instruments, assurances or any other actions or things are necessary or
desirable to consummate the Merger or vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of either of the Company or
Merger Sub acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger or otherwise to carry out the purpose and
intent of this Agreement, then the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of either the Company or Merger Sub, all such deeds, bills of sale,
instruments of conveyance, assignments,
8
instruments and assurances and to take and do, in the name and on behalf of
each such corporation or otherwise, all such other actions and things necessary
to consummate the Merger and to carry out the purpose and intent of this
Agreement or as may be necessary or desirable to vest, perfect or confirm any
and all right, title or interest in, to and under such rights, properties or
assets in the Surviving Corporation in each case, to the extent such action is
not inconsistent with this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the schedule prepared and signed by an
appropriate officer of the Company delivered to Parent prior to the execution
of this Agreement setting forth specific exceptions to the Company's
representations and warranties set forth herein (the "Disclosure Schedule"),
the Company represents and warrants to Parent and Merger Sub as of the date
hereof and the Closing Date as set forth below. Each exception set forth in the
Disclosure Schedule is identified by reference to the specific section or
subsection of this Agreement and relates only to such section or subsection.
Section 3.1 Organization.
(a) The Company is a corporation duly incorporated,
validly existing and in good standing (with respect to jurisdictions that
recognize such concept with respect to such entity) under the laws of the
jurisdiction of its incorporation and has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification or
licensing necessary, except in such other jurisdictions where the failure to be
so duly qualified or licensed and in good standing would not have a Company
Material Adverse Effect. For purposes of this Agreement, "Company Material
Adverse Effect" with respect to the Company means, individually or in the
aggregate, a material adverse effect on the business, capitalization, assets,
liabilities, properties, results of operations, prospects or condition
(financial or otherwise) of the Company, or that would prevent or materially
alter or delay the Merger or any of the other transactions contemplated hereby,
in each case other than as a result of (i) changes generally adversely
affecting the economy or the industry in which the Company currently operates
(so long as the Company is not disproportionately affected thereby), (ii)
changes in laws or accounting principles applicable to the Company, or (iii)
acts of war or terrorism (so long as the Company is not disproportionately
affected thereby). The Company has heretofore delivered to Parent accurate and
complete copies of the Company's Certificate of Incorporation (the "Charter")
and Bylaws as currently in effect.
(b) The Company has no Subsidiaries. The Company
does not own directly or indirectly, any Capital Stock or other equity
securities of any corporation or have any direct or indirect equity or
ownership investment or interest in any business.
9
Section 3.2 Capitalization.
(a) As of the date hereof, the authorized Capital
Stock of the Company consists of (i) 75,000,000 shares of Common Stock, of
which 10,358,600 shares were issued and outstanding, (ii) 56,813,624 shares of
Preferred Stock, of which (A) 11,415,235 shares have been designated Series A
Preferred Stock, 11,274,283 shares of which are issued and outstanding as of
the date hereof, (B) 20,851,489 shares have been designated Series B Preferred
Stock, 20,782,214 shares of which are issued and outstanding as of the date
hereof, and (C) 24,546,900 shares have been designated Series C Preferred
Stock, 23,437,499 shares of which are issued and outstanding. As of the date
hereof, (i) no shares of Common Stock or Preferred Stock are issued and held in
the treasury of the Company, (ii) no shares of Common Stock are reserved for
issuance pursuant to outstanding Warrants, (iii) 140,952 shares of Series A
Preferred Stock are reserved for issuance pursuant to outstanding Warrants,
(iv) 69,274 shares of Series B Preferred Stock are reserved for issuance
pursuant to outstanding Warrants, (v) 894,532 shares of Series C Preferred
Stock are reserved for issuance pursuant to outstanding Warrants, (vi)
5,603,573 shares of Common Stock are reserved for issuance pursuant to
outstanding Options and (vii) options to purchase 118,441 shares remain
eligible for issuance pursuant to the Stock Plan. Of the issued and outstanding
shares of Common Stock set forth in (i) above, 306,438 are subject to
repurchase rights without acceleration in connection with the Merger, and
23,334 are subject to repurchase rights with acceleration in connection with
the Merger. All of the outstanding shares of Capital Stock are, and all shares
of Capital Stock which may be issued pursuant to the exercise of outstanding
Options and Warrants will be, when issued in accordance with the respective
terms thereof, duly authorized, validly issued, fully paid and non-assessable,
in compliance with all applicable laws. The rights, preferences and privileges
of the Preferred Stock are as set forth in the Charter. Since the date of the
filing of the Charter, there have not occurred any events that would cause any
adjustment or readjustment in the applicable conversion prices of such
Preferred Stock. Section 3.2(a) of the Disclosure Schedule sets forth a true
and complete list of all holders of Securities as of the date of this Agreement
with the name, number of and type of Securities held and, where applicable, the
number, exercise or repurchase price, vesting or repurchase schedule and
acceleration provisions applicable to such Security.
(b) Immediately prior to the Effective Time, the
authorized, issued and outstanding Capital Stock of the Company shall be
identical to that in clause (a) above except (i) the number of outstanding
shares of Common Stock may be increased upon the exercise of currently
outstanding Options that are or will vest prior to the Effective Time in
accordance with their terms on the date hereof; provided that, the number of
outstanding shares of Common Stock reserved for issuance pursuant to Options
decreases by the same number, (ii) the number of shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock may be increased
to give effect to the exercise of outstanding Warrants listed in Section
3.2(b)(ii) of the Disclosure Schedule; (iii) no Warrants will be outstanding;
(iv) the number of outstanding shares of Common Stock may decrease upon the
repurchase of unvested Common Stock of terminated employees or consultants
pursuant to the terms of such employee's or consultant's stock option agreement
provided to Parent prior to the date hereof; and (v) any changes in the number
of authorized, issued or outstanding Capital Stock of the Company to which
Parent consents in advance in writing pursuant to Section 5.1 hereof. Section
3.2(b) of the Disclosure
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Schedule (which shall be delivered to Parent prior to the Effective Time) sets
forth a true and complete list of all holders of Securities as of immediately
prior to the Effective Time with the name, number of and type of Securities
held and, where applicable, the number, exercise or repurchase price, vesting
or repurchase schedule and acceleration provisions applicable to such Security.
(c) No Security will by its terms require an
adjustment in connection with the Merger. Neither the consummation of
transactions contemplated by this Agreement, nor any action taken or to be
taken by the Company in connection with such transactions, will result in (x)
any acceleration of exercisability or vesting, whether or not contingent on the
occurrence of any event on or after consummation of the Merger, in favor of any
Security, (y) any additional benefits for any optionee under any Security, or
(z) the inability of Parent after the Effective Time to exercise any right or
benefit held by the Company prior to the Effective Time with respect to any
Security assumed by Parent or any shares of Common Stock previously issued upon
exercise of a Security. The assumption by Parent of Options in accordance with
Section 2.2 hereof will not give rise to any event described in clauses (x)
through (z) in the immediately preceding sentence or constitute a breach of the
Stock Plan or any agreement entered into pursuant to such plan.
(d) Except as set forth in this Section 3.2, (i)
there are no shares of Capital Stock of the Company authorized, issued or
outstanding; (ii) there are no existing options, warrants, calls, preemptive
rights, indebtedness having general voting rights or debt convertible into
securities having such rights ("Voting Debt") or subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the
issued or unissued Capital Stock of the Company obligating the Company to
issue, transfer or sell or cause to be issued, transferred or sold any shares
of Capital Stock or Voting Debt of, or other equity interest in, the Company or
securities convertible into or exchangeable for such shares or equity
interests, or obligating the Company to grant, extend or enter into any such
option, warrant, call, subscription or other right, agreement, arrangement or
commitment and (iii) there are no outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares, or the Capital
Stock of the Company or to provide funds to make any investment (in the form of
a loan, capital contribution or otherwise) in any other entity. Except as set
forth in Section 3.2(a) hereof, the Company has issued no shares of Common
Stock or Preferred Stock, other than (x) shares of Common Stock issued on the
exercise of Options or Warrants outstanding prior to the date hereof or (y)
shares of Capital Stock issued after the date hereof to which Parent consents
in advance in writing pursuant to Section 5.1 hereof.
(e) There are no voting trusts or other agreements
or understandings to which the Company is a party with respect to the voting of
the Capital Stock of the Company.
(f) Following the Effective Time, no person will
have any right to receive Securities of the Surviving Corporation upon exercise
of Securities or otherwise.
11
(g) No Indebtedness of the Company contains any
restriction upon (i) the prepayment of any of such Indebtedness, (ii) the
incurrence of Indebtedness by the Company, or (iii) the ability of the Company
to grant any lien on its properties or assets. For purposes of this Agreement,
"Indebtedness" shall mean (i) all indebtedness, whether or not contingent, for
borrowed money or for the deferred purchase price of property or services,
(including but not limited to amounts referred to by the Company as equipment
debt, AR debt, and "growth capital" debt), (ii) any other indebtedness that is
evidenced by a note, bond, debenture or similar instrument, (iii) all
obligations under financing leases or letters of credit, (iv) all obligations
in respect of acceptances issued or created, (v) all liabilities secured by any
lien on any property, and (vi) all guarantee obligations, in each case
including the principal amount thereof, any accrued interest thereon and any
prepayment premiums or fees or termination fees with respect thereto and shall
specifically exclude trade payables and accruals incurred in the ordinary
course of business.
Section 3.3 Authority Relative to this Agreement. The Company
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Board of Directors of the Company and the Stockholders in accordance with
Section 251 of the DGCL, and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated. The holders of greater than (i) a majority of the
outstanding shares of Common Stock, voting as a separate class, (ii) a majority
of the outstanding shares of Preferred Stock, voting as a separate class, and
(iii) a majority of the outstanding Capital Stock entitled to vote thereon
(together the "Required Vote") have duly executed and delivered Consents (which
Consents shall become effective immediately upon the execution of this
Agreement) to the Company and Parent approving this Agreement and the
consummation of the transactions contemplated hereby, appointing the
Stockholder Representative and amending the Charter in order to effect the
transactions contemplated hereby.
Section 3.4 Consents and Approvals; No Violations. No notice
to, filing with, and no permit, authorization, consent or approval of, any
arbitrator, court, nation, government, any state or other political subdivision
thereof and any entity exercising executive, legislative, judicial regulatory
or administrative functions of, or pertaining to, government (a "Governmental
Entity"), or any private third party is necessary for the consummation by the
Company of the transactions contemplated by this Agreement. Neither the
execution and delivery of this Agreement by the Company, the consummation by
the Company of the transactions contemplated hereby nor compliance by the
Company with any of the provisions hereof will (i) conflict with or result in
any material breach of any provision of the Charter or Bylaws, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or result in the creation of any mortgage, pledge, charge,
security interest, claim or encumbrance of any kind (other than licenses or
other agreements relating to IP which are not intended to secure an obligation)
(collectively, a "Lien")) under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, contract, agreement or other
instrument or obligation to which the Company is a party or by which it or any
of its properties or assets may be bound or
12
(iii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, or its properties or assets.
Section 3.5 Financial Statements.
(a) The Company has previously provided Parent with
its audited balance sheet as of December 31, 2005 (the "December Balance
Sheet") and its unaudited balance sheet as of July 31, 2006 as set forth on
3.5(a) of the Disclosure Schedule (the "July Balance Sheet"), and the related
statements of operations and, with respect to the audited financial statements,
statements of cash flows for the preceding three (3) fiscal years and the
interim period then ended, including, with respect to the audited financial
statements, the notes thereto (together, the "Financial Statements"). The
Financial Statements for the three (3) years ended December 31, 2005 have been
audited by Ernst & Young LLP, the Company's independent accountants. The
Financial Statements are true and correct in all material respects and fairly
present, in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied, the financial position of the Company
as of such dates and its results of operations and cash flows for such fiscal
periods except, in the case of such unaudited statements, for normal recurring
year end adjustments which adjustments will not be material, either
individually or in the aggregate, and the absence of footnotes.
(b) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; and (iii) access to
assets is permitted only in accordance with management's general and specific
authorization. Since January 1, 2002, neither the Company nor, to the Company's
Knowledge, any director, officer, employee, auditor, accountant or
representative of the Company has received or otherwise become aware of any
complaint, allegation, assertion or claim, whether written or oral, regarding
the accounting or auditing practices, procedures, methodologies or methods of
the Company or of its internal controls over financial reporting, including any
complaint, allegation, assertion or claim that the Company has engaged in
questionable accounting or auditing practices. There have been no instances of
fraud, whether or not material, that occurred during any period covered by the
Financial Statements involving the management of the Company or other employees
or consultants of the Company who have a role in preparation of the Financial
Statements.
(c) The Company has no Indebtedness.
Section 3.6 Absence of Certain Changes. Since the December
Balance Sheet, the Company has not:
(a) suffered any Company Material Adverse Effect;
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(b) incurred any liabilities or obligations (whether
asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, due or to become due or otherwise) except
non-material items incurred in the ordinary course of business and consistent
with past practice, none of which exceeds $25,000 (counting obligations or
liabilities arising from one transaction or a series of similar transactions,
and all periodic installments or payments under any lease or other agreement
providing for periodic installments or payments, as a single obligation or
liability), or increased, or experienced any change in any assumptions
underlying or methods of calculating, any bad debt, contingency or other
reserves other than trade payables incurred in the ordinary course of business
and consistent with past practice;
(c) paid discharged or satisfied any claim,
liabilities or obligations (whether asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, due or to become
due or otherwise) other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities
and obligations reflected or reserved against in the December Balance Sheet or
incurred since December 31, 2005 in the ordinary course of business, consistent
with past practice and not material in the aggregate;
(d) permitted or allowed any of its property or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
Liens except for liens for real and personal property Taxes not yet due and
payable;
(e) written down the value of any of its material
inventory (including write-downs by reason of shrinkage or mark-down) or
written off as uncollectible any notes or accounts receivable, except for
immaterial write-downs and write-offs in the ordinary course of business and
consistent with past practice;
(f) cancelled any debts or waived any claims or
rights of material value;
(g) sold, transferred, or otherwise disposed of any
of its material properties or assets (real, personal or mixed, tangible or
intangible);
(h) granted any increase in the compensation or
benefits of any director, officer, employee or consultant of the Company
(including any such increase pursuant to any Benefit Plan) or any increase in
the compensation or benefits payable or to become payable to any director,
officer, employee or consultant of the Company;
(i) disposed of, granted, obtained, or permitted to
lapse any rights to, any Intellectual Property except for non-material
Intellectual Property as necessary in the ordinary conduct of business and
consistent with past practice;
14
(j) disposed of or disclosed to any Person, other
than representatives of Parent, any Trade Secret;
(k) made any change in severance policy or practices
or established, amended or agreed to establish or amend any Benefit Plan,
except as required by applicable law;
(l) made any capital expenditure or acquired any
property, plant and equipment for a cost in excess of $25,000 per fiscal
quarter in the aggregate;
(m) declared, paid or set aside for payment any
dividend or other distribution in respect of its Capital Stock or redeemed,
purchased or otherwise acquired, directly or indirectly, any shares of Capital
Stock or other securities of the Company;
(n) filed any amendment to any Tax Return, made any
election relating to Taxes, change any election relating to Taxes already made,
adopted or changed any accounting method relating to Taxes, entered into any
closing agreement relating to Taxes, settled any claim or assessment relating
to Taxes or consented to any claim or assessment relating to Taxes or any
waiver of the statute of limitation for any such claim or assessment;
(o) paid, loaned or advanced any amount to, or sold,
transferred or leased any material properties or assets (real, personal or
mixed, tangible or intangible) to, or entered into any agreement or arrangement
with, any of its officers, directors or stockholders or any affiliate or
associate of any of its officers, directors or stockholders except for
directors' fees, and compensation to officers at rates not inconsistent with
the Company's past practice;
(p) agreed to be bound by any exclusivity provisions
or similar such provisions under which the Company is restricted (either
directly or through a third party appointed to do the same) from selling,
licensing or otherwise distributing any of its products to any class of
customers, in any geographic area;
(q) agreed to be bound by any "most favored nations"
pricing or commercial terms in any contract, agreement or other commitment;
(r) taken any action prohibited by Section 5.1
hereof; or
(s) agreed, whether in writing or otherwise, to take
any action described in this Section 3.6.
Since the December Balance Sheet date, none of the persons with which the
Company or any subsidiary or joint ventures has a material business
relationship has given notice in writing or
15
other indication of any intention to cancel or otherwise terminate a material
business relationship with the Company or any subsidiary or joint venture and,
to the Company's Knowledge, no event has occurred or failed to occur which (i)
would reasonably be expected to result in the cancellation or termination of
such a business relationship or (ii) would entitle any such entity or customer
to terminate such business relationship.
Section 3.7 No Undisclosed Liabilities. Except as
specifically provided in the July Balance Sheet, the Company does not have any
liabilities (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, due or to become
due or otherwise) that were not fully reflected or fully reserved against in
the July Balance Sheet other than liabilities incurred in the ordinary course
of business, consistent with past practice and that are not material in the
aggregate.
Section 3.8 Information in Disclosure Documents. None of the
information supplied by the Company for inclusion or incorporation by reference
in the information provided to Stockholders relating to the Consent, this
Agreement, the Merger or any transaction contemplated hereby, at the time it
was provided to the Stockholders and at the time of the Consent solicitation in
connection with the Merger, (a) contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or (b) did not comply
in all material respects with applicable law.
Section 3.9 No Default. The Company is not in default or
violation (and no event has occurred which with notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) the Charter or its Bylaws, (ii) any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation to
which the Company is a party or by which it or any of its material properties
or assets may be bound, (iii) any order, writ, injunction, decree, or (iv) any
statute, rule or regulation applicable to the Company, except with respect to
clauses (ii) and (iv) of this Section 3.9, such defaults or violations that,
individually or in the aggregate, would not be expected to result in a Company
Material Adverse Effect.
Section 3.10 Litigation. There is no action, suit,
proceeding, arbitration, investigation pending before any Government Entity or
arbitration or mediation panel or, to the Company's Knowledge, threatened in
which the Company is a party. The foregoing includes, without limitation,
actions pending or to the Company's Knowledge, threatened involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any Intellectual Property allegedly proprietary to any of
their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any order
or decree of any Governmental Entity. There is no action, suit, proceeding,
arbitration or investigation which the Company presently intends to initiate.
To the Company's Knowledge, there are no occurrences, facts, or circumstances
which would give rise to a claim or potential claim against the Company, or
those to which the Company owes any obligation of indemnification or defense,
for the violation of the rights of any third party or the violation of any law,
order, or regulation.
16
Section 3.11 Compliance with Laws. The Company is in
compliance with, and has not violated any applicable law, rule or regulation of
any United States federal, state, local, or foreign government or agency
thereof which materially affects the business, properties or assets of the
Company and no notice, charge, claim or action has been received by the Company
or has been filed, commenced or, to the Company's Knowledge, threatened against
the Company alleging any such violation. All material licenses, permits and
approvals required under such laws, rules and regulations are in full force and
effect.
Section 3.12 Taxes.
(a) The Company has timely filed with the
appropriate Tax Authorities all Tax Returns required to be filed, and such Tax
Returns are true, correct, and complete;
(b) The Company has paid all Taxes required to be
paid other than those (i) currently payable without penalty or interest, or
(ii) being contested in good faith by appropriate proceedings properly
instituted and diligently pursued, and in the case of both clauses (i) and (ii)
are fully reserved for on the July Balance Sheet of the Company. All
liabilities for Taxes attributable to the period commencing on the date
following the date of the December Balance Sheet have been incurred in the
ordinary course of business and are consistent in type and amount with Taxes
attributable to similar business activity conducted in prior periods;
(c) There are no liens for Taxes upon any property
or assets of the Company except for liens for real and personal property Taxes
not yet due and payable;
(d) No Federal, state, local or foreign Audits are
presently pending with regard to any Taxes or Tax Returns of the Company, and
to the Company's Knowledge, no such Audit is threatened, and no deficiency or
adjustment for any Taxes has been proposed, asserted, or assessed against the
Company. No material adjustments have been asserted as a result of any Audit
which have not been resolved and fully paid, and no issue has been raised by
any Tax Authority in any Audit of the Company or its Subsidiaries that, if
raised with respect to any other period not so audited, could be expected to
result in a proposed deficiency for any period not so audited. The Company has
not received written notice of any claim made by a Tax Authority in a
jurisdiction where the Company does not file a Tax Return, that the Company is
or may be subject to taxation by that jurisdiction;
(e) There are no outstanding requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment of any Taxes or deficiencies against the Company, and no power
of attorney granted by the Company with respect to any Taxes or Tax Returns is
currently in force;
17
(f) Neither the Company nor any former Subsidiary
(i) has been a member of an affiliated group (within the meaning of Section
1504 of the Code) or an affiliated, combined, consolidated, unitary, or similar
group for state, local or foreign Tax purposes, other than the group of which
the Company is the common parent, and (ii) has any liability for or in respect
of the Taxes of, or determined by reference to the Tax liability of, another
Person (other than the Company) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign law);
(g) The Company is not a party to, is not bound by,
and has no obligation under, any Tax sharing agreement, Tax allocation
agreement, Tax indemnification agreement, agreement where liability is
determined by reference to the Tax liability of a third party, or any similar
agreement, contract, or arrangement;
(h) The Company is not a party to any agreement,
plan, contract or arrangement that either alone or in connection with the
transactions contemplated by this Agreement could, separately or in the
aggregate, fail to be deductible to Parent, Surviving Corporation, or Company
by virtue of section 162(m) or 280G of the Code;
(i) The Company has neither agreed nor is required
to include in income any adjustment under either Section 481(a) of the Code (or
an analogous provision of state, local, or foreign law) by reason of a change
in accounting method or otherwise which would have an effect on any taxable
period following the Effective Time; and
(j) The Company has previously delivered or made
available to Parent complete and accurate copies of each of (i) all audit
reports, letter rulings, technical advice memoranda and similar documents
issued by a Tax Authority, (ii) the United States federal income Tax Returns,
and those state, local and foreign income Tax Returns filed by the Company for
the taxable periods ending on or after December 31, 2002, and (iii) any closing
agreements entered into by the Company with any Tax Authority.
Section 3.13 Employee Benefits.
(a) Section 3.13 of the Disclosure Schedule contains
a true, complete and correct list of each employee benefit plan (including,
without limitation, any "employee benefit plan," as defined in section 3(3) of
ERISA), and any employment, change of control, bonus, pension, profit sharing,
retirement, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, vacation, severance, disability,
death benefit, hospitalization, life or other benefits-related insurance,
supplemental unemployment benefits or other plan, program, policy, agreement,
arrangement or material understanding (whether formal or informal or whether or
not legally binding), (i) sponsored, maintained or contributed to or required
to be contributed to by the Company or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with the Company would be
deemed a "single employer" within the meaning of section 4001(b)(1) ERISA, for
the benefit of
18
any current or former employee, director or consultant of the Company, or (ii)
with respect to which the Company could have any liability (all the foregoing
being herein referred to as "Benefit Plans"). The Company has made available to
Parent a true and correct copy of all documents related to the Benefit Plans,
including but not limited to, (u) as they exist, the three most recent annual
reports or Form 5500 Series filings if required under ERISA, filed with the
Internal Revenue Service (the "IRS") with respect each Benefit Plan, (v) a copy
of each written Benefit Plan (including all amendments thereto) or a written
description of any Benefit Plan that is not otherwise in writing and the most
recent Summary Plan Description, any Summary of Material Modifications or Form
5500 Series if required under ERISA, (w) each trust agreement and group annuity
contract, if any, relating to such Benefit Plan, (x) the most recent actuarial
report or valuation relating to each Benefit Plan subject to Title IV of ERISA
or providing post-retirement health and/or life insurance benefits, (y) a
current determination letter received from the Internal Revenue Service with
respect to each Benefit Plan intended to qualify under section 401(a) of the
Code and (z) all contracts relating to the Benefit Plans with respect to which
the Company, or any ERISA Affiliate may have any liability, including, but not
limited to, insurance contracts, investment management agreements, subscription
and participants agreements and record keeping agreements.
(b) No Benefit Plans are subject to Title IV of
ERISA. No event has occurred and to the Company's knowledge, there exists no
condition or set of circumstances which are reasonably likely to occur in
connection with which the Company would be subject to any liability that would
have a Company Material Adverse Effect (except liability for benefits claims
and funding obligations payable in the ordinary course), under ERISA, the Code
or any other applicable law.
(c) With respect to Benefit Plans, in the aggregate,
there are no funded benefit obligations for which contributions have not been
made or properly accrued and there are no unfunded benefit obligations which
have not been accounted for by reserves, or otherwise properly footnoted in
accordance with GAAP in the Financial Statements.
(d) Each of the Benefit Plans is and has been
administered in all material respects in compliance with its terms and with
applicable laws and regulations, including, but not limited to, ERISA, the
Consolidated Omnibus Budget Reconciliation Act of 1985, the Health Insurance
Portability and Accountability Act of 1996, the Code and federal and state
securities laws.
(e) Each of the Benefit Plans that is intended to be
a qualified plan within the meaning of section 401(a) of the Code has been
determined by the IRS to be so qualified and nothing has occurred to cause the
loss of such qualified or tax-exempt status, or the Company has applied to the
IRS for such a determination prior to the expiration of the requisite period
under applicable Treasury Regulations or IRS pronouncements in which to apply
for such a determination and to make any amendments necessary to obtain a
favorable determination, or has been established under a standardized prototype
plan for which an IRS opinion letter has been obtained by the plan sponsor and
is valid as to the adopting employer. Each fund
19
established under a Benefit Plan that is intended to satisfy the requirements
of section 501(c)(9) of the Code has so satisfied such requirements.
(f) The Company has no obligation for retiree
health, medical or life insurance benefits under any Benefit Plan other than
(i) coverage mandated by applicable laws, (ii) death or retirement benefits
under any "employee pension plan" as defined in section 3(2) of ERISA, or (iii)
benefits the full cost of which is borne by the current or former employee (or
beneficiary thereof). Each Benefit Plan that is a "nonqualified deferred
compensation plan" subject to section 409A of the Code is in material
compliance with such section.
(g) No Benefit Plan is a "multiemployer pension
plan," as such term is defined in section 3(37) of ERISA or a "multiple
employer plan" as such term is defined in section 413(c) of the Code.
(h) Each Benefit Plan can be terminated within a
period of thirty (30) days, without payment of any additional compensation or
amount or the additional vesting or acceleration of any benefits.
(i) No Benefit Plan is under actual or, to the
Company's knowledge, threatened investigation, audit or review by any
governmental agency, or the subject of any claim, lawsuit, arbitration or other
proceeding.
Section 3.14 Change in Control. The Company is not a party to
any contract, agreement or understanding which contains a "change in control,"
"potential change in control" or similar provision. The consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional acts or events) result in any payment (whether of severance
pay or otherwise) becoming due from the Company to any person, or accelerate
the time of payment or vesting, or increase the amount of or otherwise enhance
any benefit due from the Company to any Person or would otherwise constitute a
parachute payment within the meaning of Section 280G of the Code.
Section 3.15 Intellectual Property.
(a) The Company owns or has a valid right to use
(and immediately following the Closing will own or have a valid right to use on
substantially identical terms and conditions as immediately prior to the
Closing) all trademarks, service marks, trade names, Internet domain names,
designs, logos, slogans, and general intangibles of like nature, together with
all goodwill, registrations and applications related to the foregoing
(collectively, "Trademarks"); patents and industrial design registrations or
applications (including any continuations, divisional, continuations-in-part,
renewals, reissues, and applications for any of the foregoing) (collectively,
"Patents"); copyrights (including any registrations and applications therefor);
"maskworks" (as defined under 17 U.S.C. ss. 901) and any applications and
registrations therefor; Software; technology; inventions, whether or not
patented, patentable,
20
tested or reduced to practice; trade secrets and other confidential
information, know-how, proprietary processes, formulae, algorithms, models, and
methodologies (collectively, "Trade Secrets," and together with the foregoing,
the "Intellectual Property") used or held for use in or necessary for the
conduct of the Company's business as currently conducted or currently
contemplated to be conducted.
(b) Section 3.15(b)(1) of the Disclosure Schedule
sets forth, for the Intellectual Property owned by the Company, a complete and
accurate list of all U.S. and foreign (i) Patents, (ii) Trademark registrations
(including Internet domain registrations) and applications and material
unregistered Trademarks, (iii) copyright and maskwork registrations and
applications, and material unregistered copyrights, including those in
Software, indicating for each, the applicable jurisdiction, registration number
(or application number), record owner and date issued (or date filed). Section
3.15(b)(2) of the Disclosure Schedule sets forth a complete and accurate list
of all license agreements (other than commercially available "shrink-wrap" or
"click-through" licenses acquired in the ordinary course of business having an
acquisition price of less than $10,000 in the aggregate for all such related
licenses) granting or restricting any right to use or practice any rights under
any Intellectual Property, whether the Company is the licensee or licensor
thereunder, and any written settlements relating to any Intellectual Property
to which the Company is a party or otherwise bound (collectively, the "License
Agreements"), indicating for each the title, the parties, date executed, and
the Intellectual Property covered thereby.
(c) The Intellectual Property owned by the Company
is free and clear of all Liens, and the Company is listed in the records of the
appropriate United States, state, or foreign agency as the sole and exclusive
owner of record and beneficial owner for each application and registration
listed in Section 3.15(b)(1) of the Disclosure Schedule. With respect to any
Patents in which the Company has an ownership interest: (i) each has been
prosecuted in material compliance with all applicable rules, policies and
procedures of the U.S. Patent and Trademark Office or applicable foreign
agency; and (ii) neither the Company nor any of its subsidiaries is aware of
any prior art or other facts that could render any of the claims in the patents
invalid or unenforceable.
(d) The Intellectual Property owned by the Company
and, to the Company's Knowledge, any Intellectual Property used by or held for
use by the Company is valid and subsisting, in full force and effect, and has
not been canceled, expired or been abandoned. There is no pending or threatened
opposition, interference or cancellation proceeding before any court or
registration authority in any jurisdiction against the registrations listed in
Section 3.15(b)(1) of the Disclosure Schedule, or, to the Company's Knowledge,
against any material Intellectual Property licensed to the Company.
(e) The products, technology and business of the
Company as currently conducted, and the products, technology and business that
the Company currently expects to commercially develop or conduct as set forth
in Section 3.15(e)(i) of the Disclosure Schedule, in each case, do not infringe
upon any Intellectual Property rights owned or controlled by any third party
(either directly or indirectly such as through contributory infringement or
inducement to
21
infringe). There are no claims or suits pending or, to the Company's Knowledge,
threatened, and the Company has not received any written notice (or to the
Company's Knowledge, any oral notice) of a third party claim or suit (1)
alleging that its activities or the conduct of its businesses infringes upon,
violates, or constitutes the unauthorized use of the Intellectual Property
rights of any third party or (2) challenging the ownership, use, validity or
enforceability of any Intellectual Property owned, used or held for use by the
Company in its business, and there has been no such written claim (or, to the
Company's Knowledge, any oral claim) asserted or, to the Company's Knowledge,
threatened in the past three (3) years against the Company or, to the Company's
Knowledge, any other person.
(f) There are no settlements, forbearances to sue,
consents, judgments, or orders or similar obligations which (i) restrict the
Company's rights to use any Intellectual Property, (ii) restrict the Company's
business in order to accommodate a third party's Intellectual Property or (iii)
permit third parties to use any Intellectual Property owned or controlled by
the Company. The Company has not licensed or sublicensed its rights in any
material Intellectual Property other than pursuant to the License Agreements,
and no royalties, honoraria or other fees are payable by the Company for the
use of or right to use any Intellectual Property, except pursuant to the
License Agreements. The License Agreements are valid and binding obligations of
all parties thereto, enforceable in accordance with their terms, and there
exists no event or condition which will result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default by
the Company or, to the Company's Knowledge, any other party under any such
License Agreement.
(g) The Company takes reasonable measures to protect
the confidentiality of Trade Secrets, including requiring its employees and
independent contractors having access thereto to execute written non-disclosure
agreements. To the Company's Knowledge, no Trade Secret has been disclosed or
authorized to be disclosed to any third party other than pursuant to a
non-disclosure agreement that adequately protects the Company's proprietary
interests in and to such Trade Secrets. Neither the Company nor, to the
Company's Knowledge, any other party to any non-disclosure agreement relating
to its Trade Secrets is in breach or default thereof.
(h) No current or former partner, director, officer
or employee of the Company (or any of their respective predecessors in
interest) will, after giving effect to the transactions contemplated herein,
own or retain any rights in or to any of the Intellectual Property owned or, to
the Company's Knowledge, used by the Company. Each such current or former
partner, director, officer or employee of the Company who has, in each case,
been involved in the development or modification of any technology or
Intellectual Property owned or purported to be owned by the Company, has
executed a written agreement expressly assigning to the Company all right,
title and interest in any inventions and works of authorship and all
Intellectual Property rights therein.
(i) To the Company's Knowledge, no third party is
misappropriating, infringing, diluting, or violating any Intellectual Property
owned by the Company and no such
22
claims have been brought or threatened against any third party by the Company
in the past six (6) years.
(j) The consummation of the transactions
contemplated by this Agreement will not result in the loss or impairment of or
payment of any additional amounts with respect to, nor require the consent of
any other person in respect of, the Company's right to own, use, or hold for
use any of the Intellectual Property as owned, used, or held for use in the
conduct of the business as currently conducted. Neither this Agreement nor the
transactions contemplated by this Agreement, will result in the Company or
Parent or any of its Affiliates: (i) granting to any third party any
incremental right to or with respect to any Intellectual Property owned by, or
licensed to, any of them, (ii) being bound by, or subject to, any incremental
non-compete or other incremental restriction on the operation or scope of their
respective business, or (iii) being obligated to pay any incremental royalties
or other amounts, or offer any incremental discounts, or being bound by any
incremental "most favored pricing" terms to any third party, (iv) attempting to
procure from Parent or any of its affiliates a license grant or covenant not to
assert under any contract. As used in this Section 3.15, an "incremental"
right, non-compete, restriction, royalty, "most favored pricing" term or
discount refers to a right, non-compete, restriction, royalty, "most favored
pricing" term or discount, as applicable, in excess of the rights,
non-competes, restrictions, royalties or discounts payable that would have been
required to be offered or granted, as applicable, had the parties not entered
into this Agreement or consummated the transactions contemplated hereby.
(k) Section 3.15(k) of the Disclosure Schedule lists
all Software (other than commercially available Software subject to
"shrink-wrap" or "click-through" licenses acquired in the ordinary course of
business having an acquisition price of less than $10,000 in the aggregate for
all such related licenses) owned, licensed, leased, or otherwise used by the
Company, and identifies which Software is owned, licensed, leased, or otherwise
used, as the case may be. Section 3.15(k) of the Disclosure Schedule lists all
Software sold, licensed, leased or otherwise distributed by the Company to any
third party, and identifies which Software is sold, licensed, leased, or
otherwise distributed as the case may be. To the Company's Knowledge, the
execution of this Agreement will not result in a release from escrow of any
Source Code in such out-licensed Software or the grant of incremental rights to
a Person with regard to such Source Code. No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of
time, or both) will, or would reasonably be expected to, result in the
disclosure or delivery by the Company or any person acting on its behalf to any
person of any Source Code in such out-licensed Software under any contract, and
no material portions of such Source Code has been disclosed, delivered or
licensed to a third party (other than deposits of Source Code with escrow
agents pursuant to escrow agreements in the ordinary course of business
consistent with past practices, which deposits have not been released from
escrow). With respect to the Software set forth in Section 3.15(k) of the
Disclosure Schedule which the Company purports to own, such Software was either
developed (i) by employees of the Company within the scope of their employment,
or (ii) by independent contractors who have assigned their rights to the
Company pursuant to written agreements. In each agreement pursuant to which the
Company has licensed its Software to third parties, the Company has not (i)
failed to limit its liability to the amount of the fees paid pursuant to the
agreements or (ii) warranted as to the performance or
23
functionality of the Software other than to state that the Software would
perform in accordance with its documentation and/or specifications. "Software"
means any and all (a) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code
or object code, (b) databases and compilations, including any and all data and
collections of data, whether machine readable or otherwise, (c) descriptions,
flow-charts and other work product used to design, plan, organize and develop
any of the foregoing, (d) the technology supporting any Internet site(s)
operated by or on behalf of the Company, and (e) all documentation, including
user manuals and training materials, relating to any of the foregoing. "Source
Code" means computer software and code, in form other than object code form,
including related programmer comments and annotations, help text, data and data
structures, instructions and procedural, object-oriented and other code, which
may be printed out or displayed in human readable form.
(l) The Company owns or has the right to use
(including, without limitation, the rights to copy and to distribute and to
sell to any party) all Software developed by the Company, whether developed for
itself (as part of its core technology or otherwise) or on behalf of any third
party.
(m) With respect to the use of the Software in the
conduct of the Company's business as it is currently conducted, (i) no capital
expenditures are necessary with respect to such use other than capital
expenditures in the ordinary course of business that are consistent with the
past practice of the Company, (ii) the Company has not experienced any material
defects in such Software, including any material error or omission in the
processing of any transactions other than defects which have been corrected,
and (iii) to the Company's Knowledge, no such Software contains any device or
feature designed to disrupt, disable, or otherwise impair the functioning of
any Software.
(n) Section 3.15(n) of the Disclosure Schedule sets
forth a list describing the title, date, and parties (as applicable) to all
license agreements for Open Source Materials to which the Company is a party
and describes the manner in which such Open Source Materials have been
utilized, including, without limitation, whether and how the Open Source
Materials have been modified and/or distributed by the Company. Except as
disclosed in Section 3.15(n) of the Disclosure Schedule, the Company has not
incorporated Open Source Materials into, or combined Open Source Materials
with, its products. "Open Source Materials" means all Software or other
material that is distributed as "open source software" or under a similar open
source licensing or distribution model, including, but not limited to, the GNU
General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla
Public License (MPL).
(o) The Company has at all times materially complied
with all applicable Laws and contractual obligations as well as its own rules,
policies, and procedures, in each case relating to privacy, data protection,
and the collection and use of personal information collected, used, or held for
use by the Company in the conduct of its business. No claims have been asserted
or threatened in writing or, to the Company's Knowledge, otherwise threatened
24
against the Company alleging a violation of any person's privacy or personal
information or data rights and the consummation of the transactions
contemplated hereby will not breach or otherwise cause any violation of any
Law, contractual obligation, or rule, policy, or procedure related to privacy,
data protection, or the collection and use of personal information collected,
used, or held for use by the Company in the conduct of its business. The
Company takes reasonable measures to ensure that such information is protected
against unauthorized access, use, modification, or other misuse.
(p) All Company products conform in all material
respects with all applicable contractual commitments and all express and
implied warranties, the Company's published product specifications and with all
regulations, certification standards and other requirements of any applicable
governmental entity or third party. The channel activities of the Company
related to sales or distribution of Company products conform in all material
respects with all applicable contractual commitments. The Company has no
liability (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, due or to become
due or otherwise) for replacement or modification of any Company product or
other damages in connection therewith other than in the ordinary course of
business. There are no material defects in the design of, or technology
embodied in, any Company product which impair or are likely to impair the
intended use of such Company product. There is no presently pending, or, to the
Company's Knowledge, threatened, and, to the Company's Knowledge, there is no
basis for, any civil, criminal or administrative actions, suits, demands,
claims, hearings, notices of violation, investigations, proceedings or demand
letters relating to any alleged hazard or alleged defect in design,
manufacture, materials or workmanship, including any failure to warn or alleged
breach of express or implied warranty or representation, relating to any
Company product. The Company has not extended to any of its customers any
written product warranties, indemnifications or guarantees that deviate in any
material respect from the standard product warranties, indemnification
arrangements or guarantees of the Company.
Section 3.16 Contracts and Commitments.
(a) There are no purchase contracts or commitments
under which the Company is required to pay in excess of $25,000;
(b) There are no outstanding sales contracts,
commitments, or proposals of the Company that call for the payment or receipt
of more than $25,000 in any fiscal quarter or which the Company believes will
result in any loss in excess of $25,000 to the Company upon full completion or
performance thereof;
(c) The Company has no outstanding contracts with
directors, officers, employees, agents, consultants, advisors, salesmen, sales
representatives, distributors, or dealers that are not cancelable by it on
notice of not longer than thirty (30) days and without liability, penalty, or
premium or any agreement or arrangement providing for the payment of any bonus
or commission based on sales or earnings;
25
(d) The Company is not in default, nor to the
Company's Knowledge is there any basis for any valid claim of default, under
any material contract made or obligation owed by it;
(e) The Company is not restricted by any contract to
which it is a party from carrying on its business anywhere in the world;
(f) The Company is not under any material liability
or obligation with respect to the return of inventory or merchandise in the
possession of wholesalers, distributors, retailers, or other customers;
(g) The Company has no obligations for borrowed
money, including guarantees of or agreements to acquire any such obligation of
others;
(h) The Company does not have any outstanding loan
to any person other than to the Company;
(i) The Company does not have any power of attorney
outstanding or any obligations or liabilities (whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, due or to become due or otherwise), as guarantor,
surety, co-signer, endorser, co-maker or indemnitor in respect of the
obligation of any person, corporation, partnership, joint venture, association,
organization, or other entity;
(j) None of the officers, directors or stockholders
of the Company has any interest in any property, real or personal, tangible or
intangible, including without limitation the rights relating to the Company
Intellectual Property, that is material to the conduct of the business of the
Company; and
(k) The Company does not have any agreements,
contracts, commitments, or restrictions that are material to its business,
financial condition, working capital, assets, liabilities (whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, due or to become due or otherwise), reserves or
operations or which require the making of any charitable contribution.
Section 3.17 Employment and Labor Matters.
(a) (i) There is no labor strike, dispute, slowdown,
stoppage or lockout actually pending, or to the Company's Knowledge, threatened
against or affecting the Company and since the Company's inception there has
not been any such action; (ii) the Company is not a party to or bound by any
collective bargaining or similar agreement with any labor organization, or work
rules or practices agreed to with any labor organization or employee
association applicable to employees of the Company; (iii) none of the employees
of the Company are represented by any labor organization or employee
association
26
and the Company has no knowledge of any current union organizing
activities among the employees of the Company, nor does any question concerning
representation exist concerning such employees; (iv) the Company has provided
to Parent true, correct and complete copies of all written personnel policies,
rules or procedures applicable to employees of the Company; (v) the Company is,
and has at all times been, in material compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work, overtime classification, immigration, equal
employment opportunity, and occupational safety and health, and is not engaged
in any unfair labor practices as defined in the National Labor Relations Act or
other applicable law, ordinance or regulation, and is, and has at all times
been, in compliance with all applicable laws respecting the classification of
employees and independent contractors, (vi) there is no unfair labor practice
charge, charge of discrimination or other complaint against the Company pending
or, to the Company's knowledge, threatened before the National Labor Relations
Board, the Equal Employment Opportunity Commission, the California Department
of Fair Employment and Housing or any other agency responsible for the
prevention of unlawful employment practices; and (vii) there are no complaints,
controversies, charges, lawsuits or other proceedings pending or, to the
Company's knowledge, threatened to be brought by any applicant for employment
or current or former employees alleging breach of any express or implied
contract for employment, any law or regulation governing employment or the
termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship. There are no employment contracts,
severance agreements, retention agreements, change in control agreements or
confidentiality agreements (other than standard employee Proprietary
Information and Invention Agreements as contemplated by Section 3.17 hereof)
with any employees of the Company. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not result in a
breach or other violation of any collective bargaining agreement or any other
employment contract to which the Company is a party.
(b) Subject to applicable Law, the Company has
provided Parent with the names, titles, base salary or wage rate, overtime
classification, most recent bonus amount, if any, and start date as of the most
recent practicable date for employees of the Company and each Company
Subsidiary.
(c) From the enactment of the Worker Adjustment and
Retraining Notification Act of 1988 (the "WARN Act") to the date of this
Agreement, the Company has not effectuated (i) a "plant closing" (as defined in
the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the Company
thereto, or (ii) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or facility of the Company, nor has the Company been
affected by any transaction or engaged in layoffs or employment terminations
sufficient in number to trigger application of any similar state or local law
including California Labor Code Section 1400. None of the employees of the
Company has suffered an "employment loss" (as defined in the WARN Act) during
the ninety (90) day period prior to the execution of this Agreement.
Section 3.18 Environmental Matters.
27
(a) The Company is in compliance with all
Environmental Laws applicable to its properties, business, or operations in all
material respects which compliance includes, but is not limited to, the
possession by the Company of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance in
all respects with the terms and conditions thereof. The Company has not
received any written communication, whether from a governmental authority,
citizens group, employee or otherwise, that alleges that the Company is not in
full compliance with all Environmental Laws, and, to the Company's Knowledge,
there are no material circumstances that may prevent or interfere with such
compliance in the future. All of the permits the Company has pursuant to
Environmental Laws are listed on Section 3.18(a) of the Disclosure Schedule.
(b) There are no Environmental Claims pending,
alleged or, to the Company's Knowledge, threatened against the Company, or,
against any person or entity whose liability for any Environmental Claim the
Company have retained or assumed either contractually or by operation of law.
(c) To the Company's Knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence or
disposal of any Material of Environmental Concern by or attributable to the
Company, that could form the basis of any Environmental Claim against the
Company or against any person or entity whose liability for any Environmental
Claim the Company has retained or assumed either contractually or by operation
of law.
(d) The Company has provided to Parent all
assessments, reports, data, results of investigations or audits, and other
information that is in the possession of or reasonably available to the Company
regarding environmental matters pertaining to or the environmental condition of
the business of the Company, or the compliance (or noncompliance) by the
Company with any Environmental Laws.
Section 3.19 Insurance.
(a) Section 3.19(a) of the Disclosure Schedule
contains an accurate and complete description of all material policies of fire,
liability, workmen's compensation and other forms of insurance owned or held by
the Company. All such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the date of the
Effective Time will have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies
will remain in full force and effect through the Closing, without the payment
of additional premiums and will not in any material way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement, subject to the terms of Section 6.7 of this Agreement.
(b) All pending claims, if any, made against the
Company that are covered by insurance have been disclosed to and accepted by
the appropriate insurance
28
companies and are being defended by such appropriate insurance companies and
are described in Section 3.19(b) of the Disclosure Schedule; no claim has been
denied since the Company's inception. During the last six (6) months, no policy
of the Company has been cancelled by the issuer thereof. During the last six
(6) months, the Company has not been refused any insurance nor has coverage
been limited by any insurance carrier.
Section 3.20 Title to Properties; Encumbrances. The Company
has good, valid and marketable title to all the tangible properties and assets
which it purports to own (real, personal and mixed), including, without
limitation, all the properties and assets reflected in the December Balance
Sheet as being owned by the Company, and all the material properties and assets
purchased by the Company since the date of the December Balance Sheet, which
subsequently acquired properties and assets (other than inventory) are listed
in Section 3.20 of the Disclosure Schedule. All such properties and assets are
free and clear of all mortgages, title defects or objections, liens, claims,
charges, security interests or other encumbrances including, without
limitation, leases, chattel mortgages, conditional sales contracts, collateral
security arrangements and other title or interest retention arrangements, and
are not, in the case of real property, subject to any rights of way, building
use restrictions, exceptions, variances, reservations or limitations except,
with respect to all such material properties and assets, (a) Liens shown on the
December Balance Sheet as securing specified liabilities or obligations and
liens incurred in connection with the purchase of property and/or assets, if
such purchase was effected after the date of the December Balance Sheet, with
respect to which no default exists; (b) imperfections of title, liens and
easements, if any, none of which are substantial in amount, materially detract
from the value or impair the use of the property subject thereto, or impair the
operations of the Company and which have arisen only in the ordinary course of
business and consistent with past practice since the date of the December
Balance Sheet; and (c) liens for current taxes not yet due. The equipment of
the Company is in good operating condition and repair and is adequate for the
uses to which it is being put.
Section 3.21 Leases. Section 3.21 of the Disclosure Schedule
contains a list of all leases relating to real property to which the Company is
a party, all of which have been previously delivered to Parent. All such leases
are valid, binding and enforceable against the Company in accordance with their
terms, and are in full force and effect; there are no existing material
defaults by the Company thereunder; and no event has occurred which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a default by the Company thereunder.
Section 3.22 Related Party Transactions. No contracts or
agreements are in effect between the Company, on the one hand, and officers,
directors or Stockholders of the Company or their respective Affiliates, on the
other hand. For purposes of this Section 3.22 of the Disclosure Schedule an
"affiliate" of any Person shall mean any other person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control", when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings that correspond to the foregoing.
29
Section 3.23 Absence of Certain Payments. Neither the Company
nor any of its officers, directors, employees or agents or to the Company's
Knowledge, other people acting on behalf of any of them has (i) engaged in any
activity prohibited by the United States Foreign Corrupt Practices Act of 1977
or any other similar law, regulation, decree, directive or order of any
Governmental Entity and (ii) without limiting the generality of the preceding
clause (i), used any corporate or other funds for unlawful contributions,
payments, gifts or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others. Neither the Company nor
any of its directors, officers, employees or agents of other persons acting on
behalf of any of them, has accepted or received any unlawful contributions,
payments, gifts or expenditures.
Section 3.24 Brokers or Finders; Merger Expenses. Any Merger
Expenses accrued as of the date hereof, and all Merger Expenses estimated in
good faith by the Company as of the date hereof to be payable as of the Closing
Date, are set forth in Section 3.24(a) of the Disclosure Schedule. All Merger
Expenses paid or payable as of the Closing Date or thereafter are set forth in
Section 3.24(b) of the Disclosure Schedule (which shall be delivered to Parent
no later than three (3) business days prior to the Effective Time and
accompanied by all relevant supporting documents). The Company represents, as
to itself, and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any
brokers' or finder's fee or any other commission or similar fee in connection
with the origination, negotiation or execution of this Agreement or the
consummation of the Merger or any of the other transactions contemplated by
this Agreement. True and correct copies of all agreements between the Company
and any Person mentioned in Section 3.24 of the Disclosure Schedule including,
without limitation, any fee arrangements have been delivered to Parent.
Section 3.25 Opinion of Financial Advisor. Credit Suisse
Securities (USA) LLC, has delivered to the board of directors of the Company,
its oral opinion, and shall deliver to the board of directors of the Company
prior to the Effective Time, its written opinion, to the effect that the Merger
Consideration to be received by the holders of Common Stock is, in the
aggregate, fair, from a financial point of view, to holders of Common Stock.
Section 3.26 Books and Records. The minute books and stock
record books of the Company contain all (i) minutes of meetings of the
stockholders and boards of directors, (ii) written statements of actions taken
by the stockholders and boards of directors without a meeting, and (iii)
records of the issuance, transfer, transfer and cancellation of all shares of
Capital Stock and other securities, in each case since the date of
incorporation of the Company. Such minute book and stock record book are true
and complete in all material respects.
Section 3.27 Full Disclosure. The Company has disclosed to
Parent any facts material to the business, results of operations, assets,
liabilities, financial condition or prospects of the Company. No representation
or warranty by the Company in this Agreement and no statement contained in any
schedule or certificate furnished or to be furnished by the Company to Parent,
or any of its representatives pursuant to the provisions hereof taken as a
whole, contains any untrue statement of material fact or omits to state any
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the
Stockholders as of the date hereof and as of the Closing Date as set forth
below.
Section 4.1 Organization. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
Section 4.2 Authority Relative to this Agreement. Each of
Parent and Merger Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the consummation
of the Merger have been duly and validly authorized by the respective Board of
Directors of Parent and Merger Sub and approved by Parent in its capacity as
sole stockholder of Merger Sub, and no other corporate proceedings on the part
of Parent or Merger Sub are necessary to authorize this Agreement or to
consummate the Merger. This Agreement has been duly executed by Parent and
Merger Sub and constitutes a valid and binding agreement of Parent and Merger
Sub enforceable against Parent and Merger Sub in accordance with its terms
except that (a) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
Section 4.3 Activities of Merger Sub. Merger Sub was formed
for the purpose of participating in the Merger as contemplated in this
Agreement. Merger Sub has engaged in no other business activities and has
conducted its operations only as contemplated by this Agreement.
Section 4.4 Consideration. Parent currently has available,
and at the Effective Time will have available, sufficient cash or cash
equivalents to enable it to perform its obligations under this Agreement.
ARTICLE V
COVENANTS OF THE COMPANY AND THE STOCKHOLDERS
The Company covenants and agrees to perform as follows:
Section 5.1 Conduct of Business Pending Merger. Except as
otherwise specifically provided in this Agreement or in Section 5.1 of the
Disclosure Schedule, from the date of this Agreement to the earlier of
Effective Time or termination, the Company agrees, to (i) use all reasonable
efforts to conduct its operations only in the ordinary and usual course of
business and consistent with past practices and (ii) preserve intact its
present business organization, keep available the services of its present
officers, key employees and consultants and preserve its present relationships
with licensors, licensees, customers, suppliers, key
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employees and others having business relationships with it. Without limiting
the generality of the foregoing, and except as otherwise specifically provided
in this Agreement, the Company has not, and hereafter the Company will not,
directly or indirectly, prior to the Effective Time, without the prior written
consent of Parent (which will not be unreasonably withheld):
(a) propose or adopt any amendment to or otherwise
change the Charter or Bylaws, except as necessary to carry out the transactions
contemplated by this Agreement in the manner approved by Parent;
(b) authorize for issuance, sale, pledge,
disposition or encumbrance, or issue, sell, accelerate pledge, dispose of or
encumber (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase, convertible securities or
otherwise), any Capital Stock of any class or any other securities of, or any
other ownership interest in, the Company (except for (i) the issuance of
Securities specifically permitted by Section 3.2(b) hereof) or amend any of the
terms of any such securities or agreements outstanding on the date hereof;
(c) reclassify, combine, split or subdivide any
shares of its Capital Stock, declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its Capital Stock, other than any
dividend declared prior to the date hereof;
(d) redeem, purchase or otherwise acquire, or
propose or offer to redeem, purchase or otherwise acquire, any outstanding
Common Stock or other securities of the Company, other than repurchases of
unvested stock of terminated employees or consultants pursuant to the terms of
such employee's or consultant's stock option agreement provided to Parent prior
to the date hereof;
(e) organize any new subsidiary, acquire any Capital
Stock or equity securities of any corporation or acquire any equity or
ownership interest (financial or otherwise) in any business;
(f) (i) incur, assume or prepay any material
liability, or incur any indebtedness for borrowed money other than in
accordance with the Company's current financing arrangements, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any third party, (iii) make
any loans, advances or capital contributions to, or investments in, any third
party, (iv) mortgage or pledge any of its material properties or assets,
tangible or intangible, or create or suffer to exist any Lien thereupon, or (v)
authorize any new capital expenditures for property, plant and equipment which,
individually or in the aggregate, are in excess of $10,000 per fiscal quarter;
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(g) make any change in the compensation payable or
to become payable to any of its officers, directors, employees, agents or
consultants (other than normal recurring salary or bonus adjustments to
non-officer employees in the ordinary course of business consistent with past
practice) or to Persons providing management services, or enter into or amend,
in any material respect, any Benefit Plan or make any loans to any of its
officers, directors, employees, Affiliates, agents or consultants or make any
change in its existing borrowing or lending arrangements for or on behalf of
any such Persons pursuant to a Benefit Plan or otherwise;
(h) license (except for non-exclusive licenses in
the ordinary course of business) or otherwise transfer, dispose of, abandon,
permit to lapse or dedicate to the public domain any of the Company's
Intellectual Property, or dispose of or disclose to any person any trade
secret, formula, process or know-how not theretofore a matter of public
knowledge other than in the ordinary course of business consistent with past
practice and subject to appropriate confidentiality restrictions;
(i) enter into any material contract or transaction,
including but not limited to, any contract or commitment that would be
disclosable under Section 3.16 of the Disclosure Schedule had such contract or
commitment existed as of the date hereof;
(j) cancel any debts or waive, release or relinquish
any contract rights or other rights of substantial value other than in the
ordinary course of business, consistent with past practices;
(k) authorize, recommend, propose or enter into or
announce an intention to authorize, recommend, propose or enter into a term
sheet, letter of intent, agreement in principle or a definitive agreement with
respect to any merger, consolidation, liquidation, dissolution, or business
combination, any acquisition of a material amount of property or assets or
securities, or any disposition of a material amount of property or assets or
securities;
(l) make any change with respect to accounting
policies or procedures in effect as of the Company's fiscal year ended December
31, 2005;
(m) pay, discharge or satisfy any material claims,
liabilities or obligations (whether asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, due or to become
due or otherwise) other than the payment, discharge or satisfaction in the
ordinary course of business, consistent with past practices, of liabilities
reflected or reserved against in the Financial Statements;
(n) file any amendment to any Tax Return or make any
election relating to Taxes, change any election relating to Taxes already made,
adopt or change any accounting
33
method relating to Taxes, enter into any closing agreement relating to Taxes,
settle any claim or assessment relating to Taxes or consent to any claim or
assessment relating to Taxes or any waiver of the statute of limitations for
any such claim or assessment;
(o) enter into any agreement to indemnify or hold
harmless any person;
(p) taken any action set forth in Section 3.6(a)
through (q); or
(q) commit or agree (in writing or otherwise) to
take any of the foregoing actions or any action, or fail to take any action,
that would cause the failure of the conditions set forth in Article VII.
Section 5.2 No Solicitation of Competing Transaction.
(a) None of the Company or any Principal Stockholder
shall (and the Company shall not authorize or permit the officers, directors,
employees, representatives and agents of the Company and each affiliate, as
defined in Rule 12b-2 promulgated under the 1934 Act (an "Affiliate") of the
Company, including, but not limited to, investment bankers, attorneys and
accountants, to), directly or indirectly, solicit offers from, negotiate with,
encourage, contact, respond to, enable or provide financial or operational or
other non-public information to, any Person or group (other than Parent, any of
its affiliates or representatives) for the purpose of determining any interest
in acquiring any of the Capital Stock or material assets of the Company,
whether by merger, tender offer, exchange offer, sale of assets or similar
transactions involving the Company, division or operating or principal business
unit of the Company (an "Acquisition Proposal").
The Company will promptly notify Parent of the existence of any proposal,
discussion, negotiation or inquiry received by the Company, and the Company
will immediately communicate to Parent the terms of any proposal, discussion,
negotiation or inquiry which it may receive (and will promptly provide to
Parent copies of any written materials received by the Company in connection
with such proposal, discussion, negotiation or inquiry) and the identity of the
party making such proposal or inquiry or engaging in such discussion or
negotiation.
(b) None of the Company's Board of Directors, nor
any committee thereof, shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Merger Sub, the approval or
recommendation by such Board of Directors or any such committee of this
Agreement or the Merger, (ii) approve or recommend or propose to approve or
recommend, any Acquisition Proposal, (iii) enter into any agreement with
respect to any Acquisition Proposal, or (iv) revoke or rescind his, her or its
Consent approving the Merger Proposal.
Section 5.3 Further Information. As soon as such information becomes
available, and in any event not later than thirty (30) days after the end of
each fiscal month, the
34
Company shall provide to Parent an unaudited balance sheet as of the end of
such month and the related statements of results of operations and statements
of cash flows for such period together with a list of the ages and amounts of
all accounts and notes due and uncollected as of the end of such month.
Section 5.4 Access; Confidentiality.
(a) The Company shall afford to the officers,
employees, accountants and counsel of Parent, full access during normal
business hours from the date hereof until the Effective Time or termination of
this Agreement, to all its properties, books, contracts, commitments and
records and, during such period, the Company shall furnish promptly to Parent
all other information concerning its business, properties and personnel as
Parent may reasonably request.
(b) All non-public information disclosed by any
party (or its Representatives) whether before or after the date hereof, in
connection with the transactions contemplated by, or the discussions and
negotiations preceding, this Agreement to any party (or its Representatives)
shall be kept confidential by such other party and its Representatives under
the terms of the mutual non-disclosure agreement entered into between Parent
and the Company, effective February 2, 2004, as amended June 14, 2006, which
agreement shall govern all information exchanged between the parties through
the Closing, and no such information shall be used by any such Persons other
than as contemplated by this Agreement.
(c) Notwithstanding anything to the contrary herein,
none of Parent, Merger Sub or the Company, nor any of their respective
subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize the attorney-client privilege of the entity in possession
or control of such information or contravene any law, rule, regulation, order,
judgment, decree or binding agreement entered into prior to the date hereof.
The parties will make appropriate disclosure arrangements under circumstances
in which the restrictions of the immediately preceding sentence apply.
Section 5.5 280G Consent. Prior to the Closing, the Company
shall take such steps as may be necessary to prevent any payment or benefit
from being subject to the excise tax payable under section 4999 of the Code or
the loss of deductibility under section 280G of the Code in connection with the
transactions contemplated by this Agreement.
Section 5.6 Stockholder Approval; Consents.
(a) Prior to the date hereof, the Company shall have
obtained and delivered to Parent, irrevocable written consents (the
"Consents"), to be effective immediately upon the execution of this Agreement,
approving this Agreement, the Merger and any other transaction contemplated
hereby (the "Merger Proposals"), from Stockholders constituting at
35
least the Required Vote. The solicitation of such Consents shall have been
conducted in accordance with applicable laws and the Charter and Bylaws.
(b) Prior to the Closing and at the earliest
practicable date following the date hereof, the Company shall prepare, and in
form and substance reasonably acceptable to Parent and its counsel and in
accordance with applicable laws, the Charter and Bylaws, an information
statement concerning the Merger Proposals to the Stockholders (the "Stockholder
Information Statement"). As soon as practicable, the Company shall deliver to
each Stockholder, the Stockholder Information Statement, together with a copy
of Section 262 of the DGCL and Chapter 13 of the Corporations Code.
Section 5.7 Necessary Consents; Notices.
(a) The Company shall use all reasonable efforts to
obtain, prior to the Closing Date, all consents and authorizations of third
parties, give notices to third parties and take such other actions as may be
necessary or appropriate in connection with the execution of this Agreement and
the consummation of the Merger and any other transactions contemplated hereby
and to enable Parent and the Surviving Corporation to carry on the Business
immediately after the Effective Time.
(b) The Company shall terminate or obtain waivers
with respect to, or timely provide to the Stockholders and holders of Options
and Warrants, all notices required to be given to such holders in connection
with the execution of this Agreement and the consummation of the Merger and any
other transactions contemplated hereby. The form and content of all such
notices shall be approved in advance by Parent.
Section 5.8 Transfer of Domain Names. The Company shall cause
the transfer to the Company, of each domain name used, owned or purported to be
owned by the Company.
ARTICLE VI
OTHER COVENANTS
Section 6.1 All Reasonable Efforts.
(a) Prior to the Closing, upon the terms and subject
to the conditions set forth in this Agreement, each of the parties agrees to
use all reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable (including under the HSR Act)
to consummate and make effective, in the most expeditious manner practicable,
the Merger and the other transactions contemplated by this Agreement, including
using reasonable efforts to accomplish the following: (i) taking all reasonable
acts necessary to cause the conditions
36
precedent set forth in Article VII to be satisfied, (ii) obtaining all
necessary actions or non-actions, waivers, consents, approvals, orders and
authorizations from Governmental Entities (including under the HSR Act) and the
making of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any) and
taking all commercially reasonable steps as may be necessary to avoid any suit,
claim, action, investigation or proceeding by any Governmental Entity, (iii)
obtaining all necessary consents, approvals or waivers from third parties, (iv)
defending any suits, claims, actions, investigations or proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) execution or delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry
out the purposes of, this Agreement. Notwithstanding anything in this Agreement
to the contrary, neither Parent nor any of its affiliates shall be under any
obligation to effect an Action of Divestiture.
Section 6.2 Publicity. The initial press release with respect
to the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company and none of the parties to this Agreement shall issue a
press release without the prior written consent of Parent and the Company.
Thereafter, until the Effective Time, or the date this Agreement is terminated
or abandoned pursuant to Article VIII hereof, neither the Company nor any
Principal Stockholder nor any of their respective Affiliates shall issue or
cause the publication of any press release or other announcement with respect
to the Merger or this Agreement without prior approval of Parent.
Section 6.3 Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent
of the occurrence (or non-occurrence) of any event of which the Company has
Knowledge, the occurrence (or non-occurrence) of which would be likely to cause
any representation or warranty of the Company contained in this Agreement to be
untrue or inaccurate in any material respect and of the occurrence of any
material failure of the Company to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder such
that any condition in Article VII would not be satisfied; (b) Parent shall give
prompt notice to the Company of the occurrence (or non-occurrence) of any event
of which Parent has Knowledge, the occurrence (or non-occurrence) of which
would be likely to cause any representation or warranty of Parent contained in
this Agreement to be untrue or inaccurate in any material respect and of the
occurrence of any material failure of Parent to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder such that any condition in Article VII would not be satisfied;
provided, however, that (x) delivery of any notice pursuant to this Section 6.3
shall not limit or otherwise affect the remedies available to either party
hereunder, (y) shall not constitute an admission by the party delivering such
notice that any such representation or warranty has been breached and (z) shall
not affect or be deemed to modify any representation or warranty contained in
this Agreement (or any exhibit, schedule, or certificate delivered pursuant to
this Agreement) or the conditions to the parties to consummate the transactions
contemplated hereby.
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Section 6.4 Employees; Employee Benefits.
(a) Following the Effective Time, Parent shall
provide employees of the Company who remain employees of Parent or the
Surviving Corporation (the "Remaining Employees") with (i) benefit plans
providing coverage and benefits which, in the aggregate, are no less favorable
than those provided to similarly situated employees of Parent and (ii) credit
for years of service with the Company prior to the Effective Time for purpose
of eligibility and vesting pursuant to Parent's plans and policies to the
extent such service was recognized for such purpose by a comparable Benefit
Plan (but not for accrual of benefits to the extent that such credit would
result in a duplication of benefits). The preceding sentence shall not preclude
the Surviving Corporation, Parent or any Subsidiary of Parent at any time
following the Effective Time from terminating the employment of any Remaining
Employee and shall not modify or alter the at-will status of any Remaining
Employee. The transactions contemplated hereby will not result in accelerated
vesting of any Options.
(b) The Company shall cooperate fully with Parent,
including by providing Parent with such information as is necessary or
appropriate, to enable Parent to satisfy its obligations pursuant to this
Section 6.4. The Company shall pay all premiums, fees and accruals relating to
all compensation and Benefit Plans due or payable prior to the Effective Time.
(c) The Company shall take all necessary actions to
provide that as of the Effective Time (i) no holder of Options will have any
right to receive shares of common stock of the Surviving Corporation upon
exercise of any such Option and (ii) any and all Benefit Plans identified by
Parent shall terminate effective earlier than or simultaneous with the
Effective Time.
(d) Parent agrees to file, as soon as practicable
following the Closing Date and, in any event, within thirty (30) business days,
a registration statement on Form S-8 covering the shares of Parent Common Stock
issuable pursuant to outstanding Options assumed by Parent. The Company shall
cooperate with and assist Parent in the preparation of such registration
statement.
Section 6.5 Tax Matters.
(a) Tax Periods Ending on or Before the Closing
Date. Parent shall prepare and cause to be prepared and file or cause to be
filed all Tax Returns for the Company for all periods ending on or prior to the
Closing Date that are filed after the Closing Date. Such Tax Returns shall be
prepared in accordance with past practice of the Company and, in the case of
the United States federal income tax return Form 1120, shall be subject to the
Stockholder Representative's approval (which approval shall not be unreasonably
withheld or delayed) and shall be delivered to the Stockholder Representative
at least thirty (30) days prior to the due date (or if less than 30 (thirty)
days remain before filing is due, one third (1/3) of the days remaining
38
between Closing and the filing due date to the extent feasible) for review and
approval. Except as required by applicable law, for a period of eighteen (18)
months from the Closing Date, Parent shall not file an amended Tax Return
related to any period ending on or prior to the Closing Date without the
Stockholder Representative's approval (which approval shall not be unreasonably
withheld or delayed).
(b) Taxable Periods Beginning Before and Ending
After the Closing Date. Parent shall prepare and cause to be prepared and file
or cause to be filed all Tax Returns for the Company for all periods beginning
before the Closing Date and ending after the Closing Date. The United States
federal income tax return Form 1120 shall be subject to the Stockholder
Representative's approval (which approval shall not be unreasonably withheld or
delayed) and shall be delivered to the Stockholder Representative at least
thirty (30) days prior to the due date (or if less than 30 (thirty) days remain
before filing is due, one third (1/3) of the days remaining between Closing and
the filing due date to the extent feasible).
(c) Taxable Periods Beginning and Ending After the
Closing Date. Parent shall be responsible for, and shall have sole discretion
with respect to, all Tax Returns required to be filed by the Company with
respect to any taxable period that begins after the Closing Date.
(d) Cooperation and Assistance. Parent and the
Stockholder Representative shall provide each other with such cooperation and
assistance as may be reasonably requested by either of them in connection with
the preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes, and until the seventh (7th) anniversary of the Closing Date, and
each will retain and provide the other with any records or information which
may be necessary for such Tax Return audit, or examination, proceedings or
determination. Parent and the Stockholder Representative further agree, upon
request, to use their commercially reasonable efforts to obtain any certificate
or other document from any Governmental Entity or any other Person and take any
other actions, in each case, as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
Section 6.6 Directors' and Officers' Indemnification.
(a) For purposes of this Section 6.6:
(i) "Company Indemnified Parties" shall mean
the current officers and directors of Company and each other Person who is or
was a director or officer of Company at or at any time prior to the Effective
Time.
39
(ii) "Proceeding" shall mean any action, suit,
proceeding, arbitration, hearing, audit or investigation (whether civil,
criminal, administrative or investigative and whether formal or informal).
(b) Subject to the limitations of applicable law,
during the period commencing as of the Effective Time and ending on the sixth
anniversary of the Effective Time, to the extent permitted by applicable law,
the Surviving Corporation shall fulfill and honor in all respects the
obligations of the Company pursuant to (i) each indemnification agreement in
effect between the Company and any Company Indemnified Party identified in
Section 6.6(b) of the Disclosure Schedule and (ii) any indemnification
provision contained in the Charter or Bylaws (as in effect on the date of this
Agreement).
(c) After the Effective Time, the Surviving
Corporation will have the right (at its sole expense) to control the defense of
any claim or Proceeding for which indemnification may be available pursuant to
Section 6.6(b) of this Agreement; provided, however, that the Surviving
Corporation will not be permitted to enter into any settlement or compromise,
or to consent to the entry of any judgment, with respect to such claim or
Proceeding unless such settlement, compromise or consent imposes no obligation
of any nature on any Company Indemnified Party and includes an unconditional
release of all Company Indemnified Parties from all liability relating to such
claim or Proceeding.
(d) This Section 6.6 shall survive the consummation
of the Merger and the Effective Time, is intended to benefit and may be
enforced by the Company Indemnified Parties and their respective heirs,
successors and assigns and shall be binding on the Surviving Corporation and
its successors and assigns.
Section 6.7 Insurance. The Company shall reasonably cooperate
with Parent to investigate the adequacy of the scheduled insurance policies
and, at Parent's discretion, arrange for additional or replacement coverage.
The Company will, on written request from Parent, cancel insurance policies (if
possible) effective the date of Closing, and request any premium refund, if
available. In the event the Closing does not occur prior to the expiration date
for any policy listed in Section 3.19(a) of the Disclosure Schedule, the
Company shall promptly notify Parent and use all reasonable efforts to renew
such policy (including procuring the same type of coverage from a different
insurer, at the Company's reasonable discretion). Following renewal, the
Company will promptly provide copies of any such policies to Parent.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions of Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to the satisfaction at or
prior to the Closing Date of the following conditions, unless waived
specifically in writing by the Company:
40
(a) The representations and warranties of Parent and
Merger Sub set forth in this Agreement shall be true and correct in all
respects as of the date of this Agreement and the Closing Date, except where
the failure of such representations and warranties to be true and correct as of
the Closing Date does not constitute a Parent Material Adverse Effect. "Parent
Material Adverse Effect" with respect to Parent means, individually or in the
aggregate, a material adverse effect on the business, capitalization, assets,
liabilities, properties, results of operations, prospects or condition
(financial or otherwise) of Parent.
(b) Parent and Merger Sub shall have performed and
complied, in all material respects, with all obligations and covenants required
to be performed or complied with by it under this Agreement at or prior to the
Closing Date.
(c) The Company shall have received from Parent an
officer's certificate certifying to the fulfillment of the conditions specified
in Section 7.1(a) and 7.1(b).
Section 7.2 Conditions of Obligations of Parent. The
obligation of Parent and Merger Sub to effect the Merger are further subject to
the satisfaction at or prior to the Closing Date of the following conditions,
unless specifically waived in writing by Parent:
(a) The representations and warranties of the
Company set forth in this Agreement shall be true and correct in all respects
as of the date of this Agreement and the Closing Date, except where the failure
of such representations and warranties to be true and correct as of the Closing
Date does not constitute a Company Material Adverse Effect; provided, that, the
representations and warranties contained in Sections 3.2 (Capitalization), 3.3
(Authority Relative to this Agreement) and 3.24 (Brokers or Finders; Merger
Expenses) shall be true and correct in all respects on date of this Agreement
and the Closing Date.
(b) The Company shall have performed and complied,
in all material respects, with all obligations and covenants required to be
performed or complied with by it under this Agreement at or prior to the
Closing Date.
(c) From the date of this Agreement through the
Effective Time, the Company shall not have suffered a Company Material Adverse
Effect, and no events, or facts which could reasonably be expected to result in
a Company Material Adverse Effect shall have occurred or arisen.
(d) All terminations, consents, permits and
approvals of Governmental Entities and other private third parties listed in
Section 3.4 of the Disclosure Schedule and identified with an asterisk shall
have been obtained with no material adverse conditions attached and no material
expense imposed on the Company.
41
(e) No litigation or proceeding shall be threatened
or pending against Parent or the Company which seeks to enjoin or prevent the
consummation of the Merger, or to require Parent to divest or hold separate any
business in connection with the Merger, or which could reasonably be excepted
to result in a Company Material Adverse Effect.
(f) Each employee and officer of the Company shall
have entered into a Proprietary Information and Inventions Agreement, and each
consultant of the Company shall have entered into a consulting agreement
containing equivalent provisions with respect to proprietary information and
inventions, each in the form previously provided to Parent, and each Named
Employee and Designated Individual shall have entered into an Employee Creation
and Non Disclosure Agreement.
(g) The Employment Agreements executed by the Named
Employees and delivered concurrently with the execution of this Agreement shall
remain in full force and effect.
(h) The Designated Individuals listed on Exhibit E
shall have executed and delivered employment offer letters and such employment
offer letters shall remain in full force and effect.
(i) The Restrictive Covenants Agreements executed
and delivered to Parent concurrently with the execution of this Agreement shall
remain in full force and effect.
(j) The Escrow Agreement shall have been executed by
the Company and delivered to Parent and shall remain in full force and effect.
(k) The Warrants shall have been exercised,
terminated or canceled in the manner required by Section 2.3 hereof.
(l) Stockholders asserting appraisal rights in
accordance with Section 262 of the DGCL and, if applicable, Chapter 13 of the
Corporations Code, for such Stockholder's shares of Capital Stock shall hold
less than two percent (2%) of the outstanding shares of any class of Capital
Stock.
(m) This Agreement shall have been adopted and the
Merger shall have been approved by the Required Vote, which approval shall
become effective immediately upon execution of this Agreement, and shall remain
in full force and effect;
42
(n) Parent shall have received a certificate of good
standing of the Company from the Secretary of State of the State of Delaware
and all other jurisdictions in which it is required to be qualified to do
business.
(o) Parent shall have received a legal opinion from
DLA Piper Rudnick Gray Cary US LLC in the form attached hereto as Exhibit G.
(p) The Company shall have caused to be transferred
to the Company, each domain name used, owned or purported to be owned by the
Company.
(q) The Company shall have filed with the Secretary
of State of the State of Delaware, the amended and restated certificate of
incorporation of the Company in the form attached as Exhibit H, hereto;
(r) Parent shall have received from the Company an
officer's certificate certifying to the fulfillment of the conditions specified
in Sections 7.2(a) through 7.2(q), inclusive.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the Stockholders:
(a) by mutual written consent of the Company and
Parent;
(b) by either the Company or Parent, if
(i) any Governmental Entity shall have issued
an order, decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their reasonable efforts to
lift), which permanently restrains, enjoins or otherwise prohibits the
consummation of the Merger and such order, decree, ruling or other action shall
have become final and non-appealable; and
(ii) if the Merger shall not have been
consummated before December 31, 2006 (unless the failure to consummate the
Merger by such date shall be due to the action or failure to act of the party
seeking to terminate);
43
(c) by the Company, if Parent shall have breached in
any material respect any of its representations, warranties or covenants
contained in this Agreement which breach (i) causes or may cause any of the
conditions set forth in Section 7.1 not to be satisfied and (ii) shall not have
been cured within ten (10) business days following receipt by Parent of written
notice of such breach from the Company;
(d) by Parent, if the Company shall have breached in
any material respect any representation, warranty or covenant contained in this
Agreement which breach (i) causes or may cause any of the conditions set forth
in Section 7.2 not to be satisfied and (ii) shall not have been cured within
ten (10) business days following receipt by the Company of written notice of
such breach from Parent.
(e) by Parent, if a Company Material Adverse Effect
shall have occurred and shall not have been cured or remedied within ten (10)
business days from the date of its occurrence.
(f) if the Merger is not approved and adopted by the
Required Vote in accordance with the DGCL, the Corporations Code and the
Charter or such adoption and approval does not continuously remain in effect;
Section 8.2 Effect of Termination. In the event of the
termination of this Agreement by any party hereto pursuant to the terms of this
Agreement, written notice thereof shall forthwith be given to the other party
or parties specifying the provision hereof pursuant to which such termination
is made, and there shall be no liability on the part of Parent or the Company
except for fraud, intentional misrepresentation or breach of this Agreement.
ARTICLE IX
INDEMNIFICATION AND ESCROW
Section 9.1 Indemnification by the Stockholders. Subject to
the limitations set forth in this Article IX, the Stockholders shall severally
and not jointly indemnify, hold harmless and reimburse each of Parent and the
Surviving Corporation and any employee, director, officer, affiliate, or agent
of each of them (the "Indemnified Parties") for any demand, claim, payment,
obligation, action or cause of action, assessment, loss, Tax, liability,
damages (but excluding exemplary or punitive damages other than such damages
arising in connection with or relating to patent or trademark laws), cost or
expense (including reasonable attorneys' fees and expenses) or other damages
(collectively, "Damages") arising or relating to, directly or indirectly, from
or in connection with: (a) any inaccuracy in any of the warranties or
representations of the Company in this Agreement, (b) any matters set forth in
Schedule B, attached hereto, (c) any failure by the Company prior to the
Effective Time to perform or comply with any covenant or obligation in this
Agreement, or (d) any Third Party Claim (as defined below) arising from or
relating to clause (a) through (c) above.
44
Section 9.2 Procedure for Third Party Claims. Promptly after
receipt by an Indemnified Party under Section 9.1 of notice of the commencement
of any action or demand or claim by a third party (a "Third Party Claim") which
may give rise to Damages, such Indemnified Party shall, if a claim in respect
thereof is to be made against an indemnifying party under such Section, give
notice to the Stockholder Representative (as defined in the Escrow Agreement)
of its assertion of such claim for indemnification and of the commencement of
the action of its assertion of such claim for indemnification and of the
commencement of the action or assertion of the Third Party Claim with respect
to which the claim for indemnification pertains.
Section 9.3 Indemnity Period. No claim for indemnification
under Section 9.1 of this Agreement may be made unless notice of such claim or
related claim is given by the party seeking such indemnification to the party
from whom indemnification is sought on or prior to the date that is eighteen
(18) months following the Effective Time; provided, however, that the indemnity
period for claims for indemnification from and against Damages arising,
directly or indirectly, from or in connection with (i) any inaccuracy in any of
the warranties or representations of the Company contained in Section 3.2
(Capitalization), Section 3.3 (Authority Relative to this Agreement), Section
3.12 (Taxes), Section 3.13 (Employee Benefits), and Section 3.24 (Brokers or
Finders; Merger Expenses), (ii) any willful or intentional misrepresentation by
the Company, (iii) any willful or intentional breach by the Company of any
covenant or agreement of the Company, or (iv) fraud, in each case, shall be the
expiration of the applicable statute of limitations.
Section 9.4 Indemnification Basket. The provisions for
indemnity contained in Section 9.1 shall become effective only in the event
that the aggregate amount of all indemnifiable damages for which the
Stockholders are liable under this Article IX exceeds $350,000 (the
"Indemnification Basket"), and then only for the amount by which such
indemnifiable damages exceed the Indemnification Basket; provided, however,
that the Indemnification Basket shall not apply to any claim for
indemnification from and against Damages arising, directly or indirectly, from
or in connection with (i) any inaccuracy in any of the warranties or
representations of the Company of which with the Company had knowledge at any
time prior to the date on which such warranty or representation is made, (ii)
any willful or intentional misrepresentation by the Company, (iii) any willful
or intentional breach by the Company of any covenant or agreement of the
Company, or (iv) fraud. For purposes of determining whether the Indemnification
Basket has been satisfied with respect to any breach of the representations and
warranties contained in Article III hereof that are qualified by a materiality
or Material Adverse Effect qualifier or standard, any such representation or
warranty so qualified shall be deemed breached if it is untrue or incorrect,
without giving effect to such materiality or Material Adverse Effect qualifier
or standard.
Section 9.5 Limitation on Indemnity. Following the Effective
Time, the sole recourse of the Indemnified Parties shall be the Escrow Fund and
recovery from the Escrow Amount shall be the sole and exclusive remedy of the
Indemnified Parties; provided, however, that the preceding limitation in this
sentence shall not apply to or otherwise limit any claim for indemnification
from and against Damages arising, directly or indirectly, from or in connection
with (i) any inaccuracy in any of the warranties or representations of the
Company of which with the Company had knowledge at any time prior to the date
on which such warranty or representation is made, (ii) any inaccuracy in any of
the warranties or representations of the
45
Company contained in Section 3.2 (Capitalization), Section 3.3 (Authority
Relative to this Agreement), Section 3.12 (Taxes), Section 3.13 (Employee
Benefits), and Section 3.24 (Brokers or Finders; Merger Expenses), (iii) any
willful or intentional misrepresentation by the Company, (iv) any willful or
intentional breach by the Company of any covenant or agreement of the Company,
or (v) fraud; provided, further, that no Stockholder, other than a Stockholder
that has committed or participated in an act of fraud, shall be liable for
indemnification obligations pursuant to clause (v) of this Section 9.5 in an
amount that exceeds such Stockholder's pro rata portion of the Merger
Consideration; provided, also, that one-half of the then remaining amounts in
the Escrow Fund not then subject to a claim for indemnification shall be
released on September 1, 2007. Notwithstanding the foregoing, to the extent,
and only to the extent, there are available amounts in the Escrow Fund not
subject to an unresolved claim for indemnification or a resolved but
unsatisfied claim for indemnification, the Indemnified Parties shall attempt to
recover first from the Escrow Fund before seeking recovery from the
Stockholders.
Section 9.6 The Stockholder Representative.
(a) The Stockholders will authorize, designate and
appoint, as part of their approval and adoption of this Agreement and the
transactions contemplated herein, the Stockholder Representative to act as the
sole and exclusive agent, attorney-in-fact and representative of each of the
Stockholders by the consent of the Stockholders and as such is hereby
authorized and directed to (i) take any and all actions (including without
limitation executing and delivering any documents, incurring any costs and
expenses for the account of the Stockholders and making any and all
determinations required by this Agreement or the Escrow Agreement) which may be
required in carrying out his duties under this Agreement or the Escrow
Agreement, (ii) exercise such other rights, power and authority as are
authorized, delegated and granted to the Stockholder Representative under this
Agreement or the Escrow Agreement in connection with the transactions
contemplated hereby and thereby, and (iii) exercise such rights, power and
authority as are incidental to the foregoing. Any such actions taken, exercises
of rights, power or authority, and any decision or determination made by the
Stockholder Representative consistent therewith shall be absolutely and
irrevocably binding on each Stockholder as if such Stockholder personally had
taken such action, exercised such rights, power or authority or made such
decision or determination in such Stockholder's individual capacity.
(b) The Stockholder Representative shall have no
duties towards the Stockholders, and shall not incur any liability to the
Stockholders, and the Stockholders shall have no claims, including those that
may arise in the future, against the Stockholder Representative for any action
or inaction taken or not taken by him in connection with his service as the
Stockholder Representative, except to the extent that such action or inaction
shall have been held by a court of competent jurisdiction to constitute willful
misconduct. The Stockholders shall severally indemnify and hold the Stockholder
Representative harmless against any loss, liability or expense incurred without
gross negligence or bad faith on the part of the Stockholder Representative and
arising out of or in connection with the acceptance or administration of his
duties hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Stockholders' Agent ("Stockholder Representative
Expenses"). Following the termination date of the escrow, the resolution of all
unresolved claims and the satisfaction of all claims made by Indemnified
Parties for Damages, the Stockholder Representative shall have the right to
recover Stockholder Representative Expenses from the Escrow Fund prior to any
distribution to the Stockholders, and prior to any such distribution, shall
deliver to the Escrow Agent a certificate setting forth the Stockholder
Representative Expenses actually incurred.
46
(c) The Stockholder Representative shall have
reasonable access to information about the Surviving Corporation and the
reasonable assistance of Surviving Corporation's executive officer for purposes
of performing his duties and exercising his rights hereunder; provided that the
Stockholder Representative shall treat confidentially and not disclose any
nonpublic information from or about Surviving Corporation or the Parent to
anyone (except on a need to know basis to individuals who agree in writing to
treat such information confidentially); provided, further that such access and
assistance shall not interfere with or adversely affect the Surviving
Corporation's business.
Section 9.7 Actions of the Stockholder Representative. A
decision, act, consent or instruction of the Stockholder Representative shall
constitute a decision of all Stockholders and shall be final, binding and
conclusive upon each such Stockholder. The Escrow Agent and Parent may rely
upon any decision, act, consent or instruction of the Stockholder
Representative as being the decision, act, consent or instruction of each and
every such Stockholder. The Escrow Agent and the Parent are hereby relieved
from any liability to any person for any acts done by them in accordance with
such decision, act, consent or instruction of the Stockholder Representative.
Section 9.8 No Right of Contribution. No Stockholder shall
have any right of contribution against the Company or the Surviving Corporation
with respect to any breach by the Company of any of its representations,
warranties, covenants or agreements. Each Stockholder irrevocably grants,
transfers and assigns to the Company, its right to sue all other Stockholders
for claims arising, directly or indirectly, from or in connection with, any act
of fraud for which, and to the extent that, such Stockholder's maximum
liability pursuant to Section 9.5 hereof, is less than the amount of Damages
claimed by an Indemnified Party.
Section 9.9 FIRPTA Certificate. At or prior to Closing, the
Company shall have delivered to Parent a form of notice to the Internal Revenue
Service in accordance with the requirements of Treasury Regulation Section
1.897-2(h)(2) in substantially the form of Exhibit F hereto (the "FIRPTA
Certificate") along with written authorization for Parent to deliver such
FIRPTA Certificate to the Internal Revenue Service on behalf of the Company
upon the Closing of the Merger; provided, however, that if an Officer fails to
provide the FIRPTA Certificate, the transaction shall nonetheless close and
Parent shall withhold from the Merger Consideration and pay over to the
appropriate taxing authorities the amount required to be withheld under section
1445 of the Code as determined by Parent.
47
ARTICLE X
DEFINITIONS AND INTERPRETATION
Section 10.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context clearly requires
otherwise:
"Acquisition Proposal" shall have the meaning set forth in
Section 5.2(a) hereof.
"Action of Divestiture" means (i) making proposals, executing
or carrying out agreements or submit to legal requirements providing for the
license, sale or other disposition or holding separate (through the
establishment of a trust or otherwise) of any assets or categories of assets
that are material to Parent, Company or any of their respective subsidiaries or
the holding separate of Capital Stock, stock of Merger Sub or stock of the
Surviving Corporation, or imposing or seeking to impose any limitation on the
ability of Parent, Company, or any of their respective subsidiaries to conduct
their respective businesses or own such assets or to acquire, hold or exercise
full rights of ownership of Company's business or shares of Capital Stock (or
shares of stock of the Surviving Corporation) or (ii) otherwise taking any step
to avoid or eliminate any impediment which may be asserted under any legal
requirement governing competition, monopolies or restrictive trade practices.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of
the Exchange Act.
"Aggregate Number of Fully Diluted Stock" shall mean the sum
of (i) the number of shares of Common Stock outstanding immediately prior to the
Effective Time, (ii) the number of shares of Common Stock issuable upon the
conversion of all shares of Preferred Stock outstanding immediately prior to the
Effective Time, (iii) the number of shares of Common Stock issuable upon the
conversion of all Warrants or other Securities convertible into Preferred Stock
or Common Stock outstanding immediately prior to the Effective Time including
shares tendered as payment upon the exercise of such Warrant or other Security
subsequent to the date hereof, (iv) the number of shares of Common Stock
issuable upon the exercise of all vested and unvested Options outstanding
immediately prior to the Effective Time, including all shares of Restricted
Stock, and (v) the number of shares of Common Stock outstanding upon the
issuance, exercise, and if applicable, subsequent conversion of, any other right
to acquire, or commitments or obligations to issue, any Securities of the
Company of any nature whatsoever.
"Aggregate Merger Consideration" shall mean an amount of cash
equal to $173,132,509.
"Agreement" or "this Agreement" shall mean this Agreement and
Plan of Merger, together with the Exhibits and Schedules hereto.
"Ancillary Agreements" shall mean the Escrow Agreement, the
Restrictive Covenants Agreements, the Employment Agreements, and the Restricted
Stock Agreements.
"Audit" shall mean any audit, assessment, or other
examination relating to Taxes by any Tax Authority or any judicial or
administrative proceedings relating to Taxes.
"Benefit Plans" shall have the meaning set forth in Section
3.13(a) hereof.
48
"Board" shall have the meaning set forth in the recitals
hereto.
"Business" shall mean the business of the Company, as
presently conducted.
"Capital Stock" shall mean Common Stock together with the
Preferred Stock.
"Certificate of Merger" shall have the meaning set forth in
Section 1.3 hereof.
"Certificates" shall have the meaning set forth in Section
2.1(b) hereof.
"Charter" shall have the meaning set forth in 3.1(a) hereof.
"Closing" shall mean the closing referred to in Section 1.2.
"Closing Date" shall have the meaning set forth in Section
1.2 hereof.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended.
"Common Stock" shall mean the common stock, $0.001 par value,
of the Company.
"Common Stock Certificates" shall have the meaning set forth
in Section 2.1(a) hereof.
"Common Stock Merger Consideration" shall mean an amount of
cash per each share of Common Stock or Preferred Stock outstanding at the
Effective Time equal to the quotient obtained by dividing (a) a numerator equal
to (i) the Remaining Consideration reduced by (ii) the sum of (x) the aggregate
amount of any Merger Expenses that exceed the amount set forth on Section
3.24(a) of the Disclosure Schedule and (y) the aggregate amount paid or payable
under contractual obligations of the Company to repurchase, redeem or otherwise
acquire any Securities; by (b) a denominator equal to the Aggregate Number of
Fully Diluted Stock outstanding or deemed outstanding. For illustrative
purposes, Schedule C hereto sets forth the calculation of Common Stock Merger
Consideration as of the date hereof, pursuant to which the calculation of
Common Stock Merger Consideration equal to $1.9322 per share is shown on line
65. At the Effective Time, the amount on line 65 of Schedule C shall be
recalculated based only on adjustments to the amounts on lines 19, 20, 21, 22,
23, 45, 46, 48, and 61 of such schedule. For example, if at the Effective Time,
all amounts shown on Schedule C remain unchanged other than an increase by
$100,000 on line 46 of Schedule C (resulting in a corresponding decrease on
line 48 of such schedule), then the Common Stock Merger Consideration as of the
Effective Time would be $1.9308 per share as calculated on line 65 of Schedule
C. The actual Common Stock Merger Consideration as of the Effective Time may be
higher or lower than the example in the previous sentence, or the amount shown
on Schedule C as of the date hereof. Schedule C includes additional text not
defined in this Agreement, which is intended to provide clarification, but in
the case of any contradiction between Schedule C and the terms contained in
this Agreement, the terms contained in this Agreement shall prevail.
"Company" shall have the meaning set forth in the preamble
hereto.
49
"Company Indemnified Party" shall have the meaning set forth
in Section 6.6(a)(i) hereof.
"Company Material Adverse Effect" shall have the meaning set
forth in Section 3.1(a) hereof.
"Consents" shall have the meaning set forth in Section 5.6(a)
hereof.
"Corporations Code" shall have the meaning set forth in the
recitals hereto.
"Damages" shall have the meaning set forth in Section 9.1
hereof.
"December Balance Sheet" shall have the meaning set forth in
Section 3.5(a) hereof.
"Designated Individuals" are as set forth on Exhibit F
attached hereto.
"DGCL" shall have the meaning set forth in the recitals
hereto.
"Disclosure Schedule" shall have the meaning set forth in
Article III.
"Dissenting Shares" shall have the meaning set forth in
Section 2.8 hereof.
"Effective Time" shall have the meaning set forth in Section
1.3 hereof.
"Employment Agreement" shall have the meaning set forth in
the recitals hereto.
"Environmental Claim" means any material claim, action, cause
of action, investigation or notice (written or oral) by any person or entity
alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or release into
the environment, of any Material of Environmental Concern at any location,
whether or not owned or operated by the Company or (b) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all federal, state, local and
foreign laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), including, without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
3.13(a) hereof.
50
"Escrow Agreement" shall have the meaning set forth in the
recitals hereto.
"Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
"Escrow Amount" shall be an amount of cash equal to fifteen
percent (15%) of the aggregate Merger Consideration payable by Parent.
"Escrow Fund" shall have the meaning set forth in the Escrow
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Financial Statements" shall have the meaning set forth in
Section 3.5(a) hereof.
"FIRPTA Certificate" shall have the meaning set forth in
Section 9.9.
"GAAP" shall have the meaning set forth in Section 3.5(a)
hereof.
"Governmental Entity" shall have the meaning set forth in
Section 3.4 hereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indebtedness" shall have the meaning set forth in Section
3.2(g).
"Indemnified Parties" shall have the meaning set forth in
Section 9.1.
"Indemnification Basket" shall have the meaning set forth in
Section 9.4 hereof.
"Intellectual Property" shall have the meaning set forth in
Section 3.15(a) hereof.
"IRS" shall have the meaning set forth in Section 3.13(a)
hereof.
"July Balance Sheet" shall have the meaning set forth in
Section 3.5(a) hereof.
"Knowledge" with respect to the Company shall mean the actual
knowledge of the officers and directors of the Company and such knowledge as
would reasonably be expected to be known by any individual having the
professional duties and responsibilities of such person after reasonable
inquiry.
"License Agreements" shall have the meaning set forth in
Section 3.15(b) hereof.
"Lien" shall have the meaning set forth in Section 3.4
hereof.
"Liquidation Consideration" shall mean an amount of cash
equal to sum of (a) the product of (i) number of shares of Series A Preferred
Stock outstanding immediately prior to the Effective Time and (ii) $0.4658, (b)
the product of (i) the number of shares of Series B Preferred Stock outstanding
immediately prior to the Effective Time and (ii) $0.5774168, and (c) the
product of (i) the number of shares of Series C Preferred Stock outstanding
immediately prior to the Effective Time and (ii) $0.64; provided, that, in no
event shall the Liquidation Consideration
51
exceed $32,929,716 in the aggregate. For illustrative purposes, Schedule C
hereto sets forth the calculation of Liquidation Consideration.
"Materials of Environmental Concern" shall mean chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products and any other substance that is currently regulated by an
Environmental Law or that is otherwise a danger to health, reproduction or the
environment.
"Merger" shall have the meaning set forth in the recitals
hereto.
"Merger Consideration" shall have the meaning set forth in
Section 2.1(b) hereof.
"Merger Expenses" shall have the meaning set forth in Section
11.2 hereof.
"Merger Proposals" shall have the meaning set forth in
Section 5.6(a) hereof.
"Merger Sub" shall have the meaning set forth in the preamble
hereto.
"Named Employees" shall be the employees whose names are set
forth on Exhibit B-1.
"Open Source Materials" shall have the meaning set forth in
Section 3.15(n) hereof.
"Option" shall have the meaning set forth in Section 2.2(a)
hereof.
"Option Exchange Ratio" shall have the meaning set forth in
Section 2.2(a) hereof.
"Parent" shall have the meaning set forth in the preamble
hereto.
"Parent Common Stock" shall mean shares of common stock, par
value $0.001, of Parent.
"Parent Material Adverse Effect" shall have the meaning set
forth in Section 7.1(a) hereof.
"Patents" shall have the meaning set forth in Section 3.15(a)
hereof.
"Payment Agent" shall have the meaning set forth in Section
2.5 hereof.
"Person" shall mean a natural person, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Entity or other
entity or organization.
"Preferred Stock" shall mean the Series A Preferred Stock,
Series B Preferred Stock, and Series C Preferred Stock of the Company.
"Principal Stockholders" shall have the meaning set forth in
the preamble hereto.
52
"Proceeding" shall have the meaning set forth in Section
6.6(a)(ii) hereof.
"Remaining Consideration" shall mean the (i) Aggregate Merger
Consideration less (ii) the Liquidation Consideration.
"Remaining Employee" shall have the meaning set forth in
Section 6.4(a) hereof.
"Required Vote" shall have the meaning set forth in Section
3.3 hereof.
"Restrictive Covenants Agreement" shall have the meaning set
forth in the recitals hereto.
"Restricted Stock" shall mean all shares of Common Stock,
including any share of Common Stock issued upon the exercise of unvested
Options, that are subject to forfeiture, redemption and/or repurchase by the
Company pursuant to option agreements, Restricted Stock Agreements or similar
agreements or arrangements with the Company.
"Restricted Stock Agreement" shall have the meaning set forth
in Section 2.5(a) hereof.
"Securities" shall mean any options, warrants, common stock,
preferred stock or any other securities or rights to acquire securities.
"Series A Merger Consideration" shall mean an amount of cash
per share equal to the sum of (i) $0.4658 plus (ii) the Common Stock Merger
Consideration. For illustrative purposes, Schedule C hereto sets forth the
calculation of Series A Merger Consideration.
"Series A Preferred Stock" shall mean the Series A Preferred
Stock, $0.001 par value, of the Company.
"Series B Merger Consideration" shall mean an amount of cash
per share equal to the sum of (i) $0.5774168 plus (ii) the Common Stock Merger
Consideration. For illustrative purposes, Schedule C hereto sets forth the
calculation of Series B Merger Consideration.
"Series B Preferred Stock" shall mean the Series B Preferred
Stock, $0.001 par value, of the Company.
"Series C Merger Consideration" shall mean an amount of cash
per share equal to the sum of (i) $0.64 per share plus (ii) the Common Stock
Merger Consideration. For illustrative purposes, Schedule C hereto sets forth
the calculation of Series C Merger Consideration.
"Series C Preferred Stock" shall mean the Series C Preferred
Stock, $0.001 par value, of the Company.
"Software" shall have the meaning set forth in Section
3.15(k) hereof.
"Source Code" shall have the meaning set forth in Section
3.15(k) hereof.
53
"Stockholder Information Statement" shall have the meaning
set forth in Section 5.6(b) hereof.
"Stockholder Representative" shall mean Steven F. Foster.
"Stockholder Representative Expenses" shall have the meaning
set forth in Section 9.6(b) hereof.
"Stockholders" shall have the meaning set forth in the
recitals hereto.
"Stock Plan" shall mean the Company's 2001 Stock Option Plan.
"Subsidiary" shall mean, with respect to any Person, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such party
or by any one or more of its Subsidiaries, or by such party and one or more of
its Subsidiaries or (ii) such party or any other Subsidiary of such party is a
general partner (excluding any such partnership where such party or any
Subsidiary of such party does not have a majority of the voting interest in
such partnership).
"Surviving Corporation" shall mean the successor or surviving
corporation in the Merger.
"Tax" or "Taxes" means all Federal, state, local, and foreign
taxes, and other assessments of a similar nature (whether imposed directly or
through withholding), including any interest, additions to tax, or penalties
applicable thereto, imposed by any Tax Authority.
"Tax Authority" means the Internal Revenue Service and any
other domestic or foreign governmental authority responsible for the
administration of any Taxes.
"Tax Returns" mean all federal, state, local, and foreign tax
returns, declarations, statements, reports, schedules, forms, and information
returns and any amendments thereto.
"Third Party Claim" shall have the meaning set forth in
Section 9.2 hereof.
"Trade Secrets" shall have the meaning set forth in Section
3.15(a) hereof.
"Trademarks" shall have the meaning set forth in Section
3.15(a) hereof.
"Voting Debt" shall have the meaning set forth in Section
3.2(d) hereof.
"WARN Act" shall have the meaning set forth in Section
3.17(c) hereof.
"Warrants" shall have the meaning set forth in Section 2.3
hereof.
Section 10.2 Interpretation.
54
(a) When a reference is made in this Agreement to a
section or article, such reference shall be to a section or article of this
Agreement unless otherwise clearly indicated to the contrary.
(b) Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation."
(c) The words "hereof", "herein" and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, paragraph, exhibit and schedule references are
to the articles, sections, paragraphs, exhibits and schedules of this Agreement
unless otherwise specified.
(d) The plural of any defined term shall have a
meaning correlative to such defined term, and words denoting any gender shall
include all genders. Where a word or phrase is defined herein, each of its
other grammatical forms shall have a corresponding meaning.
(e) A reference to any party to this Agreement or any
other agreement or document shall include such party's successors and permitted
assigns.
(f) A reference to any legislation or to any
provision of any legislation shall include any modification or re-enactment
thereof, any legislative provision substituted therefor and all regulations and
statutory instruments issued thereunder or pursuant thereto.
(g) The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any provisions of this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Survival. Except as otherwise specifically
provided in Article IX of this Agreement, the representations, warranties,
covenants and agreements made by the Company herein shall survive any
investigation made by Parent and the closing of the transactions contemplated
hereby. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant to this
Agreement shall be deemed to be representations and warranties by the Company
hereunder.
Section 11.2 Fees and Expenses.
55
(a) Except as specifically provided to the contrary
in this Agreement, all fees, costs and expenses (including but not limited to,
all brokers' fees, data room costs and the fees, costs and expenses of legal
counsel, financial advisors, investment bankers, insurance and accountants and
all fees and expenses incurred in connection with the filing of the
Notification and Report Forms under the HSR Act), incurred or accelerated in
connection with this Agreement and the consummation of the Merger or any of the
other transactions contemplated hereby (the "Merger Expenses") shall be paid by
the party incurring such expenses; provided, that if any legal action is
instituted to enforce or interpret the terms of this Agreement, the prevailing
party in such action shall be entitled, in addition to any other relief to
which the party is entitled, to reimbursement of its actual attorneys fees;
provided, further, that Company and Parent shall share equally all fees payable
to Governmental Entities incurred in connection with the filing of the
Notification and Report Forms under the HSR Act.
Section 11.3 Amendment. This Agreement may be amended by the
written agreement by each of the parties hereto but no amendment shall be made
that by law requires further approval by the Stockholders without such approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of Parent, Merger Sub and the Company.
Section 11.4 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party.
Section 11.5 Notices. All notices and other communications
hereunder shall be in writing (and shall be deemed given upon receipt) if
delivered personally, sent by facsimile transmission (receipt of which is
confirmed) or by mail to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to the Company, to
SIERRA LOGIC, INC.
9083 Foothills Boulevard
Roseville, CA 95747
Attention: General Counsel
Facsimile No.: (916) 772-1811
with a copy to
DLA PIPER RUDNICK GRAY CARY US LLP
400 Capitol Mall, Suite 2400
Sacramento, CA 95814
Attention: Gilles S. Attia
56
Facsimile No.: (916) 930-3201
and
(b) if to Parent, to
EMULEX CORPORATION
3333 Susan Street
Costa Mesa, CA 92626-7112
Attention: General Counsel
Facsimile No.: (714) 641-0172
with a copy to
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
525 University Avenue, Suite 1100
Palo Alto, CA 94301
Attention: Gregory C. Smith
Facsimile No.: (650) 470-4570
and
(c) if to the Stockholder Representative, to
TPG Ventures, L.P.
2882 Sand Hill Road, Suite 106
Menlo Park, CA 94025
Attention: Steven F. Foster
Facsimile No.: (650) 289-5801
and
(d) if to a Principal Stockholder, to the address
set forth opposite his, her or its name on Schedule A, hereto.
Section 11.6 Descriptive Headings. The descriptive headings
herein are inserted for convenience only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 11.7 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
57
Section 11.8 Entire Agreement; Assignment. This Agreement
(including the Exhibits and Schedules attached hereto) together with the
Ancillary Agreements (a) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, any provisions of such latter
agreement which are inconsistent with the transactions contemplated by this
Agreement being waived hereby, and (b) shall not be assigned by operation of
law or otherwise except that Parent and Merger Sub may assign, in their sole
discretion, any or all of their rights, interests and obligations hereunder to
any direct or indirect wholly or majority owned Subsidiary or Affiliate of
Parent; provided, however, that such assignment shall not relieve Parent of its
obligations hereunder.
Section 11.9 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware without
regard to any applicable principles of conflicts of law.
Section 11.10 Specific Performance. The parties hereto agree
that if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached, irreparable
damage would occur, no adequate remedy at law would exist and damages would be
difficult to determine, and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity.
Section 11.11 Parties in Interest. Except as set forth in
Section 9.1 hereof, this Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person or persons any
rights, benefits or remedies of any nature whatsoever under or by reason of
this Agreement.
58
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
EMULEX CORPORATION
_________________________
By: Paul Folino
Its: Chairman & CEO
SHASTA ACQUISITION CORP.
_________________________
By: James McCluney
Its: President & COO
SIERRA LOGIC, INC.
_________________________
By: Robert D. Whitson
Its: Chief Executive Officer
STOCKHOLDER REPRESENTATIVE
_________________________
By: Steven F. Foster
PRINCIPAL STOCKHOLDER
_________________________
By: Robert D. Whitson
[Signature Page to Agreement and Plan of Merger]
COMMON STOCKHOLDERS:
--------------------
_________________________
By: Robert D. Whitson
_________________________
By: Margie Evashenk
_________________________
By: Bryan Cowger
_________________________
By: Joe Steinmetz
[Signature Page to Agreement and Plan of Merger]
PREFERRED STOCKHOLDERS:
-----------------------
TPG VENTURES, L.P.
BY: TPG VENTURES GENPAR, L.P.
BY: TPG VENTURES ADVISORS,
L.L.C.
ITS GENERAL PARTNER
_________________________
By: Steven F. Foster
Its: Vice President
TPG VENTURES ADVISORS, L.L.C.
BY: TPG VENTURES GENPAR, L.P.
BY: TPG VENTURES ADVISORS,
L.L.C.
ITS GENERAL PARTNER
_________________________
By: Steven F. Foster
Its: Vice President
[Signature Page to Agreement and Plan of Merger]
TPG VENTURES GENPAR, L.P.
BY: TPG VENTURES GENPAR, L.P.
BY: TPG VENTURES ADVISORS,
L.L.C.
ITS GENERAL PARTNER
_________________________
By: Steven F. Foster
Its: Vice President
[Signature Page to Agreement and Plan of Merger]
QTV CAPITAL LIMITED
_________________________
By:
Its:
[Signature Page to Agreement and Plan of Merger]
J.P. MORGAN PARTNERS, (BHCA), L.P.
BY: JPMP MASTER FUND MANAGER,
L.P., ITS GENERAL PARTNER
BY: JPMP CAPITAL CORP.,
ITS GENERAL PARTNER
BY: PANORAMA CAPITAL, LLC, AS
ATTORNEY IN FACT
__________________________________
By:
Its:
J.P. MORGAN PARTNERS GLOBAL
INVESTORS, L.P.
BY: JPMP GLOBAL INVESTORS, L.P.,
ITS GENERAL PARTNER
BY: JPMP CAPITAL CORP.,
ITS GENERAL PARTNER
BY: PANORAMA CAPITAL, LLC, AS
ATTORNEY IN FACT
__________________________________
By:
Its:
[Signature Page to Agreement and Plan of Merger]
J.P. MORGAN PARTNERS GLOBAL
INVESTORS (CAYMAN) , L.P.
BY: JPMP GLOBAL INVESTORS, L.P.,
ITS GENERAL PARTNER
BY: JPMP CAPITAL CORP.,
ITS GENERAL PARTNER
BY: PANORAMA CAPITAL, LLC, AS
ATTORNEY IN FACT
__________________________________
By:
Its:
J.P. MORGAN PARTNERS GLOBAL
INVESTORS (CAYMAN) II, L.P.
BY: JPMP GLOBAL INVESTORS, L.P.,
ITS GENERAL PARTNER
BY: JPMP CAPITAL CORP.,
ITS GENERAL PARTNER
BY: PANORAMA CAPITAL, LLC, AS
ATTORNEY IN FACT
__________________________________
By:
Its:
[Signature Page to Agreement and Plan of Merger]
J.P. MORGAN PARTNERS GLOBAL
INVESTORS (SELLDOWN), L.P.
BY: JPMP GLOBAL INVESTORS, L.P.,
ITS GENERAL PARTNER
BY: JPMP CAPITAL CORP.,
ITS GENERAL PARTNER
BY: PANORAMA CAPITAL, LLC, AS
ATTORNEY IN FACT
__________________________________
By:
Its:
J.P. MORGAN PARTNERS GLOBAL
INVESTORS (SELLDOWN II), L.P.
BY: JPMP GLOBAL INVESTORS, L.P.,
ITS GENERAL PARTNER
BY: JPMP CAPITAL CORP.,
ITS GENERAL PARTNER
__________________________________
By:
Its:
[Signature Page to Agreement and Plan of Merger]
J.P. MORGAN PARTNERS GLOBAL
INVESTORS A, L.P.
BY: JPMP GLOBAL INVESTORS, L.P.,
ITS GENERAL PARTNER
BY: JPMP CAPITAL CORP., ITS
GENERAL PARTNER
BY: PANORAMA CAPITAL, LLC, AS
ATTORNEY IN FACT
__________________________________
By:
Its:
[Signature Page to Agreement and Plan of Merger]
INTERWEST PARTNERS VIII, L.P.
BY: INTERWEST MANAGEMENT
PARTNERS VIII, LLC, ITS GENERAL
PARTNER
__________________________________
By:
Its:
INTERWEST INVESTORS Q VIII, L.P.
BY: INTERWEST MANAGEMENT
PARTNERS VIII, LLC
ITS GENERAL PARTNER
__________________________________
By:
Its:
INTERWEST INVESTORS VIII, L.P.
BY: INTERWEST MANAGEMENT
PARTNERS VIII, LLC
ITS GENERAL PARTNER
__________________________________
By:
Its:
[Signature Page to Agreement and Plan of Merger]
Exhibit A
---------
EXHIBIT A
ESCROW AGREEMENT
----------------
This ESCROW AGREEMENT (this "Agreement," or "Escrow
Agreement"), dated as of September ___, 2006, by and among EMULEX CORPORATION,
a Delaware corporation ("Parent"), Steven F. Foster, as Stockholder
Representative, as defined below, and U.S. Bank National Association, a
national banking association, as escrow agent (the "Escrow Agent"). Certain
capitalized terms used in this Agreement and not otherwise defined herein shall
have the meanings ascribed to them in the Merger Agreement (as defined below).
A. SIERRA LOGIC, INC., a Delaware corporation (the
"Company"), Parent, SHASTA ACQUISITION CORP., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and the Stockholder
Representative have entered into an Agreement and Plan of Merger, dated of even
date herewith (the "Merger Agreement"), a copy of which is attached hereto,
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"), with the Company remaining as the surviving corporation in the
Merger.
B. Section 2.4 of the Merger Agreement provides that within
fifteen (15) business days after the Effective Time, subject to Section 2.8 of
the Merger Agreement with respect to Dissenting Shares for which dissenters'
rights shall have been withdrawn or lost, Parent will deposit in escrow (such
deposit constituting the "Escrow Fund") cash in the amount of fifteen percent
(15%) of the aggregate Merger Consideration (the "Escrow Amount"). The Escrow
Amount shall be withheld from each Stockholder (other than Stockholders holding
Dissenting Shares) on a pro rata basis (based upon the aggregate amount of the
Merger Consideration that each Stockholder is entitled to receive pursuant to
Article II of the Merger Agreement in respect of such holder's Capital Stock
(other than Dissenting Shares, if any) relative to the aggregate amount of the
Merger Consideration that all Stockholders are entitled to receive in respect
of all Capital Stock (other than Dissenting Shares, if any) as set forth in
Appendix I) (such pro rata amount, the Stockholder's "Pro Rata Share").
C. Steven F. Foster has been elected by stockholders subject
to the Escrow Agreement to act as the sole and exclusive agent,
attorney-in-fact and representative of Stockholders to exercise the rights,
powers and authority granted herein ("Stockholder Representative").
D. The parties to this Agreement desire to establish the
terms and conditions pursuant to which the Escrow Amount will be deposited
into, held in, and disbursed from the Escrow Fund.
NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
70
1. Escrow.
(a) Escrow Fund. The Escrow Agent agrees to accept
delivery of the Escrow Amount and hold such Escrow Amount as part of the Escrow
Fund as collateral for the indemnification obligations set forth in Article IX
of the Merger Agreement until the Escrow Agent is required to release the
Escrow Property (as defined below) pursuant to the terms of this Agreement and
the Merger Agreement. For the purposes of this Agreement, subject to Section 4
hereof, "Initial Termination Date" shall mean September 1, 2007 and
"Termination Date" shall mean the date and time which is eighteen (18) months
following the Effective Time. With its deposit of the Escrow Amount, Parent
shall deliver to the Escrow Agent a certificate setting forth the Closing Date
and the Effective Time.
(b) Indemnification. For purposes of this Agreement,
references to Parent will include all other Indemnified Parties, as applicable.
It is hereby agreed that the Escrow Fund will serve as security for any Damages
as set forth in Article IX of the Merger Agreement.
2. Deposit of Escrow Amount: Release from Escrow.
(a) Delivery of Escrow Amount. Parent shall deposit the
Escrow Amount into the Escrow Account with the Escrow Agent within fifteen (15)
business days after the Closing Date. The Escrow Agent may assume without
inquiry that the Escrow Amount deposited with it has been correctly calculated
in accordance with the requirements of the Merger Agreement and that no
additional funds, other than income earned with respect to the Escrow Amount,
are required by the Merger Agreement or this Agreement to be held by the Escrow
Agent.
(b) Confirmation of Deposit. The Escrow Agent shall
provide to each of Parent and the Stockholder Representative written
confirmation promptly upon receipt of the deposit made pursuant to Section 2(a)
above.
(c) Stockholders' Accounts. The Escrow Agent will
maintain for each Stockholder a spreadsheet accounting record (each, an
"Account") specifying the portion of the Escrow Amount held for the record of
each Stockholder pursuant to this Agreement. The Escrow Amount received under
Section 2(a) will be allocated to each Stockholder's Account in accordance with
such Stockholder's Pro Rata Share in the Escrow Fund.
(d) Rights of Ownership. Any income received by the
Escrow Agent with respect to the Escrow Amount, while such Escrow Amount is
held in escrow under this Agreement shall be held in escrow in the same manner
as the Escrow Amount relating thereto, and shall collectively, with the Escrow
Amount, be considered to be "Escrow Property".
(e) Investment of Escrow Property. The Escrow Agent shall
hold the Escrow Property in escrow and shall invest the Escrow Property and any
interest or income thereon only in the Escrow Agent's Insured Money Market
Account as described in Appendix II hereto ("IMMA"). As and when any portion of
the Escrow Property and any interest or income thereon is to be released under
this Agreement, the Escrow Agent shall not be liable for any loss of principal
or income in connection therewith unless such loss results from or arises in
71
connection with the Escrow Agent's gross negligence, willful misconduct or
breach of this Agreement. All interest attributable to the Escrow Property
shall be added to and be part of, and any loss shall be charged to, the Escrow
Property for all purposes hereunder. At the time of delivery to Stockholders of
any of the Escrow Property that is distributable to Stockholders hereunder, the
Escrow Agent shall deliver to such Stockholders any accrued but unpaid interest
or other earnings on such amount of the Escrow Property distributable to
Stockholders hereunder (but not any accrued and unpaid interest or other
earnings on such amount of the Escrow Property that is distributable to Parent
hereunder, which shall instead be delivered to Parent (the "Parent Escrow
Earnings Amount")).
(f) Distribution to Stockholders. Subject to Section 4
hereof with respect to the Merger Consideration, (i) promptly after the Initial
Termination Date, the Escrow Agent will release from escrow to the Stockholders
their Pro Rata Share of (x) one-half of the Escrow Property less (y) (A) any
Escrow Property delivered to Parent in accordance with Section 4 hereof in
satisfaction of Claims, (B) any Escrow Property subject to delivery to Parent
in accordance with Section 4 hereof with respect to any then resolved but
unsatisfied Claims, and (C) any Escrow Property subject to any then pending but
unresolved Claims and (ii) promptly after the Termination Date, the Escrow
Agent will release from escrow to the Stockholders their Pro Rata Share of the
(x) remaining Escrow Property less (y)(A) any Escrow Property delivered to
Parent in accordance with Section 4 hereof in satisfaction of Claims, (B) any
Escrow Property subject to delivery to Parent in accordance with Section 4
hereof with respect to any then resolved but unsatisfied Claims, and (C) any
Escrow Property subject to any then pending but unresolved Claims. Any Escrow
Property held as a result of clauses (i)(y)(C) and (ii)(y)(C) above will be
released to the Stockholders or released to Parent (as appropriate) promptly
upon resolution of each specific Claim involved. All payments of Escrow
Property to Stockholders shall be made by check and in accordance with the
payment provided by Stockholders on their respective Letter of Transmittal
which shall be delivered to the Escrow Agent by Parent from time to time as and
when received by Parent. Any Escrow Property remaining in the Escrow Fund for
which a Letter of Transmittal shall not have been received by the Escrow Agent
by the Termination Date shall be released to Parent.
(g) Release. The Escrow Property will be held by the
Escrow Agent until required to be released to the Stockholders pursuant to
Section 2(f) above or to Parent in satisfaction of any Claims made by Parent in
accordance with Section 4 below. Notwithstanding anything to the contrary
herein, the Escrow Agent is authorized and directed to deliver any or all of
the Escrow Fund as directed from time to time in joint written instructions
signed by or on behalf of Parent and the Stockholder Representative. Escrow
Property shall be released to the respective Stockholders in accordance with
their respective Accounts.
(h) No Encumbrance. No Escrow Property or any beneficial
interest in the Escrow Property may be pledged, sold, assigned, transferred, or
otherwise encumbered, including, without limitation, by operation of law, by a
Stockholder or be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of a Stockholder, prior to the
delivery to such Stockholder of such Stockholder's portion of the Escrow
Property by the Escrow Agent in accordance with the terms and conditions of
this Agreement and the Merger Agreement.
72
(i) Withdrawals. No part of the Escrow Property may be
withdrawn from the Escrow Fund established hereunder without prior written
instructions to the Escrow Agent signed by both Parent and the Stockholder
Representative.
(j) Tax Reporting. The parties hereto agree that the
Stockholders shall be treated for all Tax purposes as the owners of their Pro
Rata Shares of the Escrow Fund. Within thirty (30) days of the date hereof, the
Stockholder Representative shall furnish to the Escrow Agent Internal Revenue
Service Forms W-9 or Forms W-8BEN for each of the Stockholders. The parties
agree that the interest and other earnings attributable to the Escrow Property
shall be treated for U.S. federal, state and local tax purposes as income of
the Stockholders in the respective proportions indicated on Appendix I;
provided, however, that in the case of any particular taxable year during which
Parent receives the Parent Escrow Earnings Amount pursuant to Section 2(e)
hereof, then any interest or other earnings earned by the Escrow Fund during
such taxable year shall be allocated to Parent for U.S. federal, state and
local income tax purposes in an amount equal to the lesser of (i) the Parent
Escrow Earnings Amount or (ii) the amount of interest or other earnings earned
by the Escrow Fund during such taxable year.
3. Notice of Claim. Each notice of a Claim by Parent (the
"Notice of Claim") will be in writing and delivered to the Escrow Agent and the
Stockholder Representative and will contain Parent's estimate of the reasonably
foreseeable maximum amount of the alleged Damages to the extent it is known to
Parent.
4. Resolution of Notice of Claim and Transfer of Escrow
Amount. Any Notice of Claim received by the Stockholder Representative and the
Escrow Agent pursuant to Section 3 above will be resolved as follows:
(a) Uncontested Claims. In the event that the Stockholder
Representative does not contest a Notice of Claim in writing to the Escrow
Agent (with a copy to Parent) within thirty (30) calendar days after a Notice
of Claim containing a statement of the claimed Damages is delivered to the
Escrow Agent pursuant to Section 6 below, the Escrow Agent will immediately
transfer to Parent the portion of Escrow Property equal to the amount of
Damages specified in the Notice of Claim, and will notify the Stockholder
Representative of such transfer.
(b) Contested Claims. In the event that the Stockholder
Representative gives written notice contesting all, or any portion of, a Notice
of Claim to Parent and the Escrow Agent (a "Contested Claim") within the 30-day
period provided above, then matters that are subject to Third Party Claims (as
defined in the Merger Agreement) brought against Parent or the Company in a
litigation or arbitration will await the final decision, award or settlement of
such litigation or arbitration, while matters that arise between Parent and the
Stockholders (or the Stockholder Representative) will be settled by binding
arbitration pursuant to this Section 4(b) ("Arbitrable Claims"). Any portion of
the Notice of Claim that is not contested will be resolved as set forth in
Section 4(a) above. The final decision of the arbitrator will be furnished to
the Escrow Agent, the Stockholder Representative and Parent in writing and will
constitute a final, conclusive and non-appealable determination of the issue in
question, binding upon the Stockholders, the Stockholder Representative and
Parent, and an order with
73
respect thereto may be entered in any court of competent jurisdiction. After
delivery of written notice by the Stockholder Representative that the Notice of
Claim is contested by the Stockholder Representative, the Escrow Agent will
continue to hold in the Escrow Fund an amount sufficient to cover such Claim
(notwithstanding the occurrence of the Initial Termination Date or Termination
Date, as applicable) until: (i) execution of a settlement or joint escrow
instructions agreement by Parent and the Stockholder Representative setting
forth a resolution of the Notice of Claim, or (ii) receipt of a copy of the
final award of the arbitrator.
(i) Arbitration. Any Arbitrable Claim and any
other dispute arising out of or relating to this Agreement shall be resolved by
arbitration before a single arbitrator in Costa Mesa, California and, except as
herein specifically stated, in accordance with the commercial arbitration rules
of the American Arbitration Association (the "AAA Rules") then in effect.
However, in all events, the provisions contained herein shall govern over any
conflicting rules which may now or hereafter be contained in the AAA Rules. Any
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction over the subject matter thereof. The arbitrator shall have
the authority to grant any equitable and legal remedies that would be available
if any judicial proceeding was instituted to resolve an Arbitrable Claim or
such dispute.
(ii) Selection of Arbitrator. The arbitrator
shall be mutually agreed upon by Parent and the Stockholder Representative.
(iii) Payment of Costs. Parent and the
Stockholder Representative on behalf of the Stockholders as a group will each
pay 50% of the initial compensation to be paid to the arbitrator in any such
arbitration and 50% of the costs of transcripts and other normal and regular
expenses of the arbitration proceedings; provided, however, that (A) the
prevailing party in any arbitration will be entitled to an award of attorneys'
fees and costs, and (B) all costs of arbitration resulting from any Claim shall
be added to the amount of such Claim and in each case, the arbitrator will be
authorized to make such determinations.
(iv) Exclusive Remedy. Except as specifically
otherwise provided in this Agreement or the Merger Agreement, arbitration will
be the sole and exclusive remedy of the parties for any Arbitrable Claim or any
other dispute arising out of or relating to this Agreement.
(v) Escrow Agent Entitled to Rely. The Escrow
Agent shall be entitled to rely upon the final award of an arbitrator and if it
complies with any such final award, it shall not be liable to any of the
parties hereto or any other third party by reason of such compliance even
though such final award may be subsequently reversed, modified, set aside or
vacated.
(c) Payment of Claims. Any amount determined to be owed
or payable to Parent pursuant to this Section 4 or otherwise under this
Agreement shall be immediately released by the Escrow Agent to Parent out of
the Escrow Property then held by the Escrow Agent.
74
(d) No Exhaustion of Remedies. Parent need not pursue or
exhaust any other remedies that may be available to it before proceeding in
accordance with the provisions contained in this Agreement. Subject to the
limitations set forth in the Merger Agreement, Parent may institute claims
against the Escrow Property and in satisfaction thereof may recover an amount,
in accordance with the terms of this Agreement, without making any other claims
directly against any Stockholders or the Stockholder Representative, and
without rescinding or attempting to rescind the transactions effected by the
Merger Agreement. The assertion of any single Claim for indemnification
hereunder will not bar Parent from asserting any other claims hereunder.
5. Limitation of Escrow Agent's Duties and Liability.
(a) The duties and responsibilities of the Escrow Agent
hereunder shall be determined solely by the express provisions of this Escrow
Agreement, and no other or further duties or responsibilities shall be implied.
The Escrow Agent shall not have any liability under, nor duty to inquire into
the terms and provisions of any agreement or instructions, other than as
outlined in this Agreement, including, without limiting the generality of the
foregoing, the Merger Agreement.
(b) The Escrow Agent may rely and shall be protected in
acting or refraining from acting upon any written notice, instruction or
request furnished to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper party or parties. The Escrow Agent shall
be under no duty to inquire into or investigate the validity, accuracy or
content of any such document. The Escrow Agent shall have no duty to solicit
any items which may be due it hereunder.
(c) The Escrow Agent shall not be liable for any action
taken or omitted by it in good faith unless a court of competent jurisdiction
determines that the Escrow Agent's willful misconduct or gross negligence was
the primary cause of any loss to Parent or any Stockholder. The Escrow Agent
may consult with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or omitted by it hereunder in
good faith and in accordance with the opinion of such counsel.
(d) Parent and the Stockholder Representative (solely on
behalf of the Stockholders) hereby agree to jointly and severally indemnify the
Escrow Agent for, and to hold it harmless against any loss, liability or
expense arising out of or in connection with this Agreement and carrying out
its duties hereunder, including the costs and expenses of investigating or
defending itself against any claim of liability, except in the case of gross
negligence or willful misconduct by the Escrow Agent. Anything in this Escrow
Agreement to the contrary notwithstanding, in no event shall the Escrow Agent
be liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Escrow
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action. The costs of enforcing this indemnity shall also be
shared equally by Parent and the Stockholder Representative on behalf of the
Stockholders. This right of indemnification shall survive the termination of
the Escrow Agreement and the removal or resignation of the Escrow Agent.
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(e) All interest or other income earned under the Escrow
Agreement shall be allocated and paid as provided herein and reported by the
recipient to the relevant tax authority as having been so allocated and paid.
(f) The Escrow Agent shall not incur any liability for
following the instructions herein contained or expressly provided for, or
written instructions given jointly by Parent and the Stockholder
Representative.
(g) In the event that the Escrow Agent shall be uncertain
as to its duties or rights hereunder or shall receive instructions, claims or
demands from any party hereto which, in its opinion, conflict with any of the
provisions of this Agreement, it shall be entitled to refrain from taking any
action and its sole obligation shall be to keep safely all Escrow Property
until it shall be directed otherwise in writing by all of the other parties
hereto or by a final order or judgment of a court of competent jurisdiction,
such final order or judgment to be accompanied by a legal opinion of counsel
for the presenting party satisfactory to the Escrow Agent to the effect that
such order or judgment is final and enforceable and not subject to further
appeal. The Escrow Agent shall act on such court order and legal opinion
without further question.
6. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or sent
by facsimile transmission (receipt of which is confirmed) or two business days
after being mailed by registered or certified mail (return receipt requested)
or by overseas courier to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) If to Parent, to:
EMULEX CORPORATION
3333 Susan Street
Costa Mesa, CA 92626-7112
Attn: Michael J. Rockenbach, Chief
Financial Officer
Telephone: (714) 885-3695
Facsimile: (714) 641-0172
with a copy to:
Skadden, Arps, Slate, Meagher and Flom LLP
525 University Avenue, Suite 1100
Palo Alto, CA 94301
Attn: Gregory C. Smith
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
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(b) If to the Stockholder Representative, to:
TPG Ventures, L.P.
2882 Sand Hill Road, Suite 106
Menlo Park, CA 94025
Attention: Steven F. Foster
Facsimile No.: (650) 289-5801
(c) If to the Escrow Agent, to:
U.S. Bank National Association
633 West Fifth Street, 24th Floor
LM-CA-T24T
Los Angeles, CA 90071
Attn: Corporate Trust Services
(Account No.: ____________)
Telephone: (213) 615-6043
Facsimile: (213) 615-6197
Notwithstanding the foregoing, notices addressed to the Escrow Agent shall only
be effective upon actual receipt.
7. General.
(a) Governing Law; Successors and Assigns. This Agreement
will be governed by and construed in accordance with the internal laws of the
State of Delaware without regard to conflict of law principles and will be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
(b) Counterparts. This Agreement may be executed in two
or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
(c) Entire Agreement. This Agreement, together with the
Merger Agreement, constitutes the entire understanding and agreement of the
parties with respect to the subject matter contained herein, and supersedes all
prior agreements or understandings, written or oral, between the parties with
respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any
condition or of any breach of any provision of this Agreement will be effective
unless in writing. No waiver by any party of any such condition or breach, in
any one instance, will be deemed to be a further or continuing waiver of any
such condition or breach or a waiver of any other condition or breach of any
other provision contained herein. The Stockholder Representative is authorized
to execute any and all waivers on behalf of each of the Stockholders.
(e) Definitions. Capitalized words shall have the
meanings included in the Merger Agreement, and as defined in this Escrow
Agreement, and with further definitions as follows (except as otherwise
expressly provided or unless the context clearly requires otherwise):
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"Claim" shall mean any fact, circumstance, or
occurrence giving rise to Damages.
"Letter of Transmittal" shall mean the letter of
transmittal, in the form approved by Parent, that each Stockholder shall
complete, execute and deliver to the Escrow Agent in connection with the
surrender of Certificates evidencing shares of Capital Stock.
8. Expenses. All reasonable fees and expenses of the Escrow
Agent incurred in the ordinary course of performing its responsibilities
hereunder will be paid in accordance with the fee schedule attached hereto as
Appendix III and will be shared equally by Parent and the Stockholder
Representative, except that fees and disbursements resulting from any Claim
shall be added to the amount of such Claim, and provided, that the portion of
such fees and expenses allocable to the Stockholder Representative shall be
paid from the Escrow Fund.
9. Successor Escrow Agent. In the event the Escrow Agent
becomes unavailable or unwilling to continue in its capacity herewith, the
Escrow Agent may resign and be discharged from its duties or obligations
hereunder by giving resignation to the parties to this Agreement, specifying a
date not less than thirty (30) days following such notice date of when such
resignation will take effect. Parent and the Stockholder representative may
jointly remove the Escrow Agent at any time with or without cause by an
instrument given to the Escrow Agent, which instrument shall designate the
effective date of such removal. Parent will designate a successor Escrow Agent
prior to the expiration of such period by giving written notice to the Escrow
Agent and the Stockholder Representative. Parent may appoint a successor Escrow
Agent without the consent of the Stockholders or the Stockholder Representative
so long as such successor is a bank with assets of at least One-hundred Million
Dollars ($100,000,000), and may appoint any other successor Escrow Agent with
the consent of the Stockholder Representative, which consent will not be
unreasonably withheld. The Escrow Agent will promptly transfer the Escrow
Property to such designated successor. If an instrument of acceptance by a
successor escrow agent shall not have been delivered to the Escrow Agent within
thirty (30) days after giving of notice of such resignation, the Escrow Agent
may, at the expense of Parent and the Stockholders, petition any court of
competent jurisdiction to appoint a successor Escrow Agent.
10. Amendment. This Agreement may be amended by the written
agreement of Parent, the Escrow Agent and the Stockholder Representative (on
behalf of each of the Stockholders), provided that, if the Escrow Agent does
not agree to an amendment agreed upon by Parent and the Stockholder
Representative, the Escrow Agent will resign and Parent will appoint a
successor Escrow Agent in accordance with Section 9 above.
11. USA Patriot Act Compliance. To help the government fight
the funding of terrorism and money laundering activities, federal law requires
all financial institutions to obtain, verify and record information that
identifies each person who opens an account. For a non-individual person such
as a business entity, a charity, a trust or other legal entity the Escrow Agent
will ask for documentation to verify its formation and existence as a legal
entity. The Escrow Agent may also ask to see financial statements, licenses,
identification and authorization
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documents from individuals claiming authority to represent the entity or other
relevant documentation. Parent and the Stockholder Representative on behalf of
the Stockholders each agree to provide all such information and documentation as
to themselves as requested by Escrow Agent to ensure compliance with federal
law.
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IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the day and year first written above.
EMULEX CORPORATION
By:
-------------------------------------
Name: Paul Folino
Title: Chairman and Chief Executive Officer
U.S. BANK NATIONAL ASSOCIATION
AS ESCROW AGENT
By:
-------------------------------------
Name: Paula M. Oswald
Title: Vice President
STEVEN F. FOSTER
AS STOCKHOLDER REPRESENTATIVE
By:
-------------------------------------
Name:
Title:
[Signature Page to Escrow Agreement]
Appendix I
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Merger Consideration Worksheet
Appendix II
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U.S. Bank National Association
Money Market Account
Description and Terms
The U.S. Bank Money Market account is a U.S. Bank National Association ("U.S.
Bank") interest-bearing money market deposit account designed to meet the needs
of U.S. Bank's Corporate Trust Services Escrow Group and other Corporate Trust
customers of U.S. Bank. Selection of this investment includes authorization to
place funds on deposit with U.S. Bank.
U.S. Bank uses the daily balance method to calculate interest on this account
(actual/365 or 366). This method applies a daily periodic rate to the principal
balance in the account each day. Interest is accrued daily and credited monthly
to the account. Interest rates are determined at U.S. Bank's discretion, and
may be tiered by customer deposit amount.
The owner of the account is U.S. Bank as Agent for its trust customers. U.S.
Bank's trust department performs all account deposits and withdrawals. The
deposit account is insured by the Federal Deposit Insurance Corporation up to
$100,000.
Appendix III
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U.S. Bank Fee Schedule